10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

COMMISSION FILE NUMBER 1-11826

MIDSOUTH BANCORP, INC.

(Exact name of registrant as specified in its charter)

Louisiana	72 –1020809
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

102 Versailles Boulevard, Lafayette, Louisiana 70501

(Address of principal executive offices, including zip code)

(337) 237-8343

(Registrant’s telephone number, including area code)

Indicate by checkmark 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 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing 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 (Section 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.

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

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 November 8, 2013, there were 11,255,563 shares of the registrant’s Common Stock, par value $0.10 per share, outstanding.

Part I – Financial Information			3
	Item 1. Financial Statements.		3
		Consolidated Balance Sheets	3
		Consolidated Statements of Earnings (unaudited)	4
		Consolidated Statements of Comprehensive Income (unaudited)	5
		Consolidated Statement of Shareholders’ Equity (unaudited)	6
		Consolidated Statements of Cash Flows (unaudited)	7
		Notes to Interim Consolidated Financial Statements	8
	Item 2. Management Discussion and Analysis of Financial Condition and Results of Operation		29
		Forward-Looking Statements	29
		Critical Accounting Policies	30
		Results of Operations	31
		Analysis of Balance Sheet	38
		Liquidity and Capital	39
		Asset Quality	40
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		43
	Item 4. Controls and Procedures.		43
Part II – Other Information			44
	Item 1. Legal Proceedings.		44
	Item 1A. Risk Factors.		44
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		44
	Item 3. Defaults Upon Senior Securities.		44
	Item 4. Mine Safety Disclosures.		44
	Item 5. Other Information.		44
	Item 6. Exhibits.		44

Part I – Financial Information

Item 1. Financial Statements.

MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share data)
	September 30, 2013			December 31, 2012*
	(unaudited)			(audited)
Assets
Cash and due from banks, including required reserves of $9,837 and $14,083, respectively	$	43,177		$	46,297
Interest-bearing deposits in banks		257			20,276
Federal funds sold		-			7,000
Time deposits held in banks		-			881
Securities available-for-sale, at fair value (cost of $356,555 at September 30, 2013 and $412,065 at December 31, 2012)		358,675			424,617
Securities held-to-maturity (fair value of $156,117 at September 30, 2013 and $156,924 at December 31, 2012)		159,141			153,524
Other investments		10,951			8,310
Loans		1,145,023			1,046,940
Allowance for loan losses		(8,667	)		(7,370	)
Loans, net		1,136,356			1,039,570
Bank premises and equipment, net		70,147			63,461
Accrued interest receivable		6,865			6,691
Goodwill		42,486			42,781
Intangibles		8,217			9,047
Cash surrender value of life insurance		13,392			13,183
Other real estate		6,672			7,496
Other assets		6,471			8,594
Total assets	$	1,862,807		$	1,851,728
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	380,048		$	380,557
Interest-bearing		1,126,078			1,171,347
Total deposits		1,506,126			1,551,904
Federal funds purchased		3,900			-
Securities sold under agreements to repurchase		73,909			41,447
Notes payable		53,059			29,128
Junior subordinated debentures		29,384			29,384
Other liabilities		6,800			10,624
Total liabilities		1,673,178			1,662,487
Commitments and contingencies
Shareholders’ equity:
Series B preferred stock, no par value; 5,000,000 shares authorized, 32,000 shares issued and outstanding at September 30, 2013 and December 31, 2012		32,000			32,000
Series C preferred stock, no par  value; 100,000 shares authorized, 99,971 shares issued and outstanding at September 30, 2013 and December 31, 2012		9,997			9,997
Common stock, $0.10 par value; 30,000,000 shares authorized, 11,403,693 and 11,386,611issued and  11,253,216 and 11,236,134 outstanding at September 30, 2013 and December 31, 2012, respectively		1,140			1,139
Additional paid-in capital		110,879			110,603
Accumulated other comprehensive income		1,378			8,159
Treasury stock – 150,477 shares at September 30, 2013 and December 31, 2012, at cost		(3,286	)		(3,286	)
Retained earnings		37,521			30,629
Total shareholders’ equity		189,629			189,241
Total liabilities and shareholders’ equity	$	1,862,807		$	1,851,728

* Derived from audited financial statements.

3

MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Statement of Earnings (unaudited)
(dollars in thousands, except per share data)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Interest income:
Loans, including fees	$	17,652	$	12,540	$	52,966	$	37,298
Securities and other investments:
Taxable		2,171		2,048		6,481		6,265
Nontaxable		785		697		2,436		2,202
Federal funds sold		1		2		6		6
Time and interest bearing deposits in other banks		15		13		70		73
Other investments		80		55		230		142
Total interest income		20,704		15,355		62,189		45,986
Interest expense:
Deposits		976		1,030		3,044		3,189
Federal funds purchased		-		-		3		-
Securities sold under agreements to repurchase		204		197		565		564
Other borrowings and payable		118		-		345		-
Junior subordinated debentures		335		241		1,007		733
Total interest expense		1,633		1,468		4,964		4,486
Net interest income		19,071		13,887		57,225		41,500
Provision for loan losses		450		300		2,250		1,550
Net interest income after provision for loan losses		18,621		13,587		54,975		39,950
Non-interest income:
Service charges on deposits		2,352		1,898		6,794		5,590
Gain on securities, net		25		69		229		204
ATM and debit card income		1,719		1,123		4,713		3,398
Other charges and fees		892		664		2,687		2,055
Total non-interest income		4,988		3,754		14,423		11,247
Non-interest expenses:
Salaries and employee benefits		8,640		6,273		25,401		18,511
Occupancy expense		3,874		2,952		11,196		8,283
FDIC insurance		265		242		854		695
Other		5,702		4,163		16,728		12,599
Total non-interest expenses		18,481		13,630		54,179		40,088
Income before income taxes		5,128		3,711		15,219		11,109
Income tax expense		1,588		1,062		4,588		3,096
Net earnings		3,540		2,649		10,631		8,013
Dividends on preferred stock		468		400		1,152		1,180
Net earnings available to common shareholders	$	3,072	$	2,249	$	9,479	$	6,833
Earnings per share:
Basic	$	0.27	$	0.21	$	0.84	$	0.65
Diluted	$	0.27	$	0.21	$	0.83	$	0.65

See notes to unaudited consolidated financial statements.

4

MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (unaudited)
(in thousands)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Net earnings	$	3,540		$	2,649		$	10,631		$	8,013
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities available-for-sale:
Unrealized gains (losses) arising during the year		(95	)		1,417			(10,203	)		2,725
Less: reclassification adjustment for gains on sales of securities available-for-sale		(25	)		(69	)		(229	)		(204	)
Total other comprehensive income (loss), before tax		(120	)		1,348			(10,432	)		2,521
Income tax effect related to items of other comprehensive income		(42	)		472			(3,651	)		883
Total other comprehensive income (loss), net of tax		(78	)		876			(6,781	)		1,638
Total comprehensive income	$	3,462		$	3,525		$	3,850		$	9,651

See notes to unaudited consolidated financial statements.

5

MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Statement of Shareholders' Equity (unaudited)
For the Nine Months Ended September 30, 2013
(in thousands, except share and per share data)
									Additional		Accumulated Other
	Preferred Stock				Common Stock				Paid-in		Comprehensive			Treasury			Retained
	Shares		Amount		Shares		Amount		Capital		Income			Stock			Earnings			Total
Balance - December 31, 2012		131,971	$	41,997		11,386,611	$	1,139	$	110,603	$	8,159		$	(3,286	)	$	30,629		$	189,241
Net earnings		-		-		-		-		-		-			-			10,631			10,631
Dividends on Series B and Series C Preferred Stock		-		-		-		-		-		-			-			(1,152	)		(1,152	)
Dividends on common stock, $0.23 per share		-		-		-		-		-		-			-			(2,587	)		(2,587	)
Common stock issued under employee stock plans, including tax benefit		-		-		17,082		1		43		-			-			-			44
Stock option and restricted stock compensation expense		-		-		-		-		233		-			-			-			233
Change in accumulated other comprehensive income		-		-		-		-		-		(6,781	)		-			-			(6,781	)
Balance – September 30, 2013		131,971	$	41,997		11,403,693	$	1,140	$	110,879	$	1,378		$	(3,286	)	$	37,521		$	189,629

See notes to unaudited consolidated financial statements.

6

MidSouth Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
	For the Nine Months Ended September 30,
	2013			2012
Cash flows from operating activities:
Net earnings	$	10,631		$	8,013
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		4,106			2,745
Accretion of purchase accounting adjustments		(4,631	)		(1,675	)
Provision for loan losses		2,250			1,550
Provision for deferred tax expense		2,181			1,599
Amortization of premiums on securities, net		3,432			1,317
Amortization of other investments		11			11
Stock option expense		212			87
Restricted stock expense		21			42
Net gain on sale of investment securities		(229	)		(204	)
Net loss on sale of other real estate owned		205			168
Net write down of other real estate owned		380			475
Net loss on sale/disposal of premises and equipment		118			6
Change in accrued interest receivable		(174	)		45
Change in accrued interest payable		(348	)		(312	)
Change in other assets & other liabilities, net		189			(59	)
Net cash provided by operating activities		18,354			13,808
Cash flows from investing activities:
Net decrease in time deposits in other banks		881			1
Proceeds from maturities and calls of securities available-for-sale		59,430			100,502
Proceeds from maturities and calls of securities held-to-maturity		19,617			14,946
Proceeds from sale of securities available-for-sale		55,808			6,558
Purchases of securities available-for-sale		(68,043	)		(79,195	)
Purchases of securities held-to-maturity		(26,382	)		(32,816	)
Proceeds from redemptions of other investments		1,000			500
Purchases of other investments		(2,653	)		(185	)
Net change in loans		(90,091	)		(63,014	)
Purchases of premises and equipment		(10,955	)		(6,239	)
Proceeds from sale of premises and equipment		45			-
Proceeds from sale of other real estate owned		940			550
Net cash used in investing activities		(60,403	)		(58,392	)
Cash flows from financing activities:
Change in deposits		(45,232	)		15,063
Change in securities sold under agreements to repurchase		32,462			9,155
Change in federal funds purchased		3,900			-
Borrowings on Federal Home Loan Bank advances		25,000			100
Repayments of Federal Home Loan Bank advances		(43	)		(100	)
Repayments of notes payable		(750	)		-
Proceeds and tax benefit from exercise of stock options		30			96
Tax benefit from issuance of restricted stock		14			-
Payment of dividends on preferred stock		(1,052	)		(1,180	)
Payment of dividends on common stock		(2,419	)		(2,198	)
Net cash provided by financing activities		11,910			20,936
Net decrease in cash and cash equivalents		(30,139	)		(23,648	)
Cash and cash equivalents, beginning of period		73,573			83,303
Cash and cash equivalents, end of period	$	43,434		$	59,655
Supplemental cash flow information:
Interest paid	$	5,106		$	4,797
Income taxes paid		3,500			2,215
Noncash investing and financing activities
Transfer of loans to other real estate		701			722
Accrued common stock dividends		912			745
Accrued preferred stock dividends		468			400
Financed sales of other real estate		-			290
Transfer of investment from available-for-sale to other investments		-			509

See notes to unaudited consolidated financial statements.

7

MidSouth Bancorp, Inc. and Subsidiaries

Notes to Interim Consolidated Financial Statements

September 30, 2013

(Unaudited)

1.Basis of Presentation

The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the financial position of MidSouth Bancorp, Inc. (the “Company”) and its subsidiaries as of September 30, 2013 and the results of their operations and their cash flows for the periods presented. The interim financial information should be read in conjunction with the annual consolidated financial statements and the notes thereto included in the Company’s 2012 Annual Report on Form 10-K.

The results of operations for the nine-month period ended September 30, 2013 are not necessarily indicative of the results to be expected for the entire year.

Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

Summary of Significant Accounting Policies — The accounting and reporting policies of the Company conform with GAAP and general practices within the banking industry.  There have been no material changes or developments in the application of accounting principles or in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies and Estimates as disclosed in our 2012 Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements — ASU 2013-01, Balance Sheet (Topic 210):  Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities applies to derivatives accounted for in accordance with ASC 815 (Derivatives and Hedging), including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities lending transactions that are either offset in accordance with ASC 210-20-45 or ASC 815-10-45 or subject to an enforceable master netting arrangement or similar agreement.  The effective date of this Update is for fiscal years beginning on or after January 1, 2013 and interim periods within those annual periods.  Adoption of this Update did not impact the Company’s consolidated financial statements or the interim notes to the consolidated financial statements.

ASU 2013-02, Comprehensive Income (Topic 220):  Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income was issued in the first quarter of 2013 to improve the reporting of reclassifications out of accumulated other comprehensive income (“AOCI”).  The ASU requires information regarding the impact to net earnings of the reclassification on significant amounts out of AOCI to be presented on either the face of the statement of earnings or in the notes to the financial statements.  The amendments in this Update do not change the current reporting requirements for net earnings or AOCI.  For public entities, the amendments in this Update are effective prospectively for reporting periods beginning after December 15, 2012.  In compliance with the Update, the information required has been included in the Consolidated Statements of Comprehensive Income and Note 5 in these unaudited consolidated financial statements.

Reclassifications — Certain reclassifications have been made to the prior years’ financial statements in order to conform to the classifications adopted for reporting in 2013.  The reclassifications had no impact on net earnings or shareholders equity.

8

2.  Investment Securities

The portfolio of investment securities consisted of the following (in thousands):

	September 30, 2013
	Amortized  Cost		Gross Unrealized  Gains		Gross Unrealized  Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	11,605	$	3	$	189	$	11,419
Obligations of state and political subdivisions		64,124		2,586		186		66,524
GSE mortgage-backed securities		151,517		2,833		1,776		152,574
Other asset-backed securities		25,424		371		73		25,722
Collateralized mortgage obligations: residential		76,244		313		2,242		74,315
Collateralized mortgage obligations: commercial		27,177		441		88		27,530
Collateralized debt obligation		464		127		-		591
	$	356,555	$	6,674	$	4,554	$	358,675

	December 31, 2012
	Amortized  Cost		Gross  Unrealized  Gains		Gross Unrealized  Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	13,422	$	2	$	-	$	13,424
Obligations of state and political subdivisions		83,093		4,328		-		87,421
GSE mortgage-backed securities		172,932		5,887		-		178,819
Collateralized mortgage obligations: residential		101,381		652		47		101,986
Collateralized mortgage obligations: commercial		28,528		1,233		-		29,761
Other asset-backed securities		12,245		497		-		12,742
Collateralized debt obligation		464		-		-		464
	$	412,065	$	12,599	$	47	$	424,617

	September 30, 2013
	Amortized  Cost		Gross Unrealized  Gains		Gross  Unrealized  Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	47,574	$	55	$	2,441	$	45,188
GSE mortgage-backed securities		81,081		798		746		81,133
Collateralized mortgage obligations: residential		14,493		-		819		13,674
Collateralized mortgage obligations: commercial		15,993		129		-		16,122
	$	159,141	$	982	$	4,006	$	156,117

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross  Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	42,900	$	7	$	7	$	42,900
GSE mortgage-backed securities		89,383		2,819		-		92,202
Collateralized mortgage obligations: residential		5,009		-		-		5,009
Collateralized mortgage obligations: commercial		16,232		581		-		16,813
	$	153,524	$	3,407	$	7	$	156,924

9

With the exception of 3 private-label collateralized mortgage obligations (“CMOs”) with a combined balance remaining of $67,000 at September 30, 2013, all of the Company’s CMOs are government-sponsored enterprise (“GSE”) securities.

The amortized cost and fair value of debt securities at September 30, 2013 by contractual maturity are shown in the following table (in thousands) with the exception of other asset-backed securities, mortgage-backed securities, CMOs, and the collateralized debt obligation.   Expected maturities may differ from contractual maturities for mortgage-backed securities and CMOs because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
Available-for-sale:
Due in one year or less	$	11,031	$	11,150
Due after one year through five years		39,560		40,758
Due after five years through ten years		19,437		20,491
Due after ten years		5,701		5,544
Other asset-backed securities		25,424		25,722
Mortgage-backed securities and collateralized mortgage obligations:
Residential		227,761		226,889
Commercial		27,177		27,530
Collateralized debt obligation		464		591
	$	356,555	$	358,675

	Amortized  Cost		Fair Value
Held-to-maturity:
Due in one year or less	$	101	$	101
Due after one year through five years		2,204		2,187
Due after five years through ten years		6,983		6,823
Due after ten years		38,286		36,077
Mortgage-backed securities and collateralized mortgage obligations:
Residential		95,574		94,807
Commercial		15,993		16,122
	$	159,141	$	156,117

Details concerning investment securities with unrealized losses are as follows (in thousands):

	September 30, 2013
	Securities with losses  under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross  Unrealized Loss		Fair  Value		Gross  Unrealized  Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
U.S. Government sponsored enterprises	$	10,544	$	189	$	-	$	-	$	10,544	$	189
Obligations of state and political subdivisions		3,616		186		-		-		3,616		186
GSE mortgage-backed  securities		74,925		1,776		-		-		74,925		1,776
Other asset-backed securities		13,275		73		-		-		13,275		73
Collateralized mortgage  obligations:
residential		49,749		2,241		66		1		49,815		2,242
Collateralized mortgage  obligations:
commercial		4,385		88		-		-		4,385		88
	$	156,494	$	4,553	$	66	$	1	$	156,560	$	4,554

10

	December 31, 2012
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized  Loss		Fair Value		Gross  Unrealized  Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
Collateralized mortgage obligations:
residential	$	10,085	$	45	$	96	$	2	$	10,181	$	47

	September 30, 2013
	Securities with losses under 12 months				Securities with losses  over 12 months				Total
	Fair Value		Gross  Unrealized  Loss		Fair Value		Gross Unrealized  Loss		Fair  Value		Gross Unrealized  Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	42,768	$	2,441	$	-	$	-	$	42,768	$	2,441
GSE mortgage-backed securities		32,373		746		-		-		32,373		746
Collateralized mortgage obligations:
residential		13,674		819		-		-		13,674		819
	$	88,815	$	4,006	$	-	$	-	$	88,815	$	4,006

	December 31, 2012
	Securities with losses  under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross  Unrealized Loss		Fair Value		Gross Unrealized  Loss		Fair  Value		Gross Unrealized  Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	1,128	$	7	$	-	$	-	$	1,128	$	7

Management evaluates each quarter whether unrealized losses on securities represent impairment that is other than temporary. For debt securities, the Company considers its intent to sell the securities or if it is more likely than not the Company will be required to sell the securities.  If such impairment is identified, based upon the intent to sell or the more likely than not threshold, the carrying amount of the security is reduced to fair value with a charge to earnings. Upon the result of the aforementioned review, management then reviews for potential other than temporary impairment based upon other qualitative factors.  In making this evaluation, management considers changes in market rates relative to those available when the security was acquired, changes in market expectations about the timing of cash flows from securities that can be prepaid, performance of the debt security, and changes in the market’s perception of the issuer’s financial health and the security’s credit quality.  If determined that a debt security has incurred other than temporary impairment, then the amount of the credit related impairment is determined.  If a credit loss is evident, the amount of the credit loss is charged to earnings and the non-credit related impairment is recognized through other comprehensive income.

As of September 30, 2013, 107 securities had unrealized losses totaling 3.37% of the individual securities’ amortized cost basis and 1.66% of the Company’s total amortized cost basis.  Two of the 107 securities had been in an unrealized loss position for over twelve months at September 30, 2013.  These two securities had an amortized cost basis and unrealized loss of $66,000 and $1,000, respectively.  The unrealized losses on debt securities at September 30, 2013 resulted from changing market interest rates over the yields available at the time the underlying securities were purchased.  Management identified no impairment related to credit quality.  At September 30, 2013, management had the intent and ability to hold impaired securities and no impairment was evaluated as other than temporary.  As a result, no other than temporary impairment losses were recognized during the nine months ended September 30, 2013.

11

During the nine months ended September 30, 2013, the Company sold 33 securities classified as available-for-sale at a net gain of $229,000.  Of the 33 securities sold, 29 securities were sold with gains totaling $242,000 and four securities were sold at a loss of $13,000.  During the nine months ended September 30, 2012, the Company sold six securities classified as available-for-sale at a gain of $204,000.

Securities with an aggregate carrying value of approximately $287.1 million and $226.2 million at September 30, 2013 and December 31, 2012, respectively, were pledged to secure public funds on deposit and for other purposes required or permitted by law.

3.  Other Investments

The Company is required to own stock in the Federal Reserve Bank of Atlanta (“FRB-Atlanta”) and as a member of the Federal Home Loan Bank system, owns stock in the Federal Home Loan Bank of Dallas (“FHLB-Dallas”).  The Company accounts for FRB-Atlanta and FHLB-Dallas stock as other investments along with stock ownership in two correspondent banks and a Community Reinvestment Act (“CRA”) investment in a Senior Housing Crime Prevention program in Louisiana. The CRA investment consisted of three government-sponsored agency mortgage-backed securities purchased by the Company and held by the Senior Housing Crime Prevention program.  The majority of the interest earned on the securities provides income to the program.

For impairment analysis, the Company reviews financial statements and regulatory capital ratios for each of the banks in which the Company owns stock to verify financial stability and regulatory compliance with capital requirements.  As of September 30, 2013 and December 31, 2012, based upon quarterly reviews, management determined that there was no impairment in the bank stocks held as other investments.

The aggregate carrying amount of other investments consisted of the following (in thousands):

	September 30, 2013		December 31, 2012
FRB-Atlanta	$	3,789	$	2,258
FHLB-Dallas		2,804		1,862
Other bank stocks		2,063		2,063
Other stocks		187		7
CRA investment		2,108		2,120
	$	10,951	$	8,310

4.   Credit Quality of Loans and Allowance for Loan Losses

The loan portfolio consisted of the following (in thousands):

	September 30, 2013			December 31, 2012
Commercial, financial and agricultural	$	423,073		$	315,655
Lease financing receivable		5,340			5,769
Real estate - construction		76,213			75,334
Real estate - commercial		401,080			414,384
Real estate - residential		142,431			142,858
Installment loans to individuals		94,722			90,561
Other		2,164			2,379
		1,145,023			1,046,940
Less allowance for loan losses		(8,667	)		(7,370	)
	$	1,136,356		$	1,039,570

The Company monitors loan concentrations and evaluates individual customer and aggregate industry leverage, profitability, risk rating distributions, and liquidity for each major standard industry classification segment.  At September 30, 2013, one industry segment concentration, the oil and gas industry, constituted more than 10% of the loan portfolio.  The Company’s exposure in the oil and gas industry, including related service and manufacturing industries, totaled approximately $189.8 million, or 16.6% of total loans.  Additionally, the Company’s exposure to loans secured by commercial real estate is monitored.  At September 30, 2013, loans secured by commercial real estate (including commercial construction, farmland and multifamily loans) totaled approximately $458.9 million.  Of the $458.9 million, $349.2 million represent CRE loans, 61.2% of which are secured by owner-occupied commercial properties.  Of the $458.9 million in loans secured by commercial real estate, $2.5 million, or 0.5%, were on nonaccrual status at September 30, 2013.

12

Allowance for Loan Losses

The allowance for loan losses is a valuation account available to absorb probable losses on loans. All losses are charged to the allowance for loan losses when the loss actually occurs or when a determination is made that a loss is likely to occur. Recoveries are credited to the allowance for loan losses at the time of recovery.  Quarterly, the probable level of losses in the existing portfolio is estimated through consideration of various factors.  Based on these estimates, the allowance for loan losses is increased by charges to earnings and decreased by charge‑offs (net of recoveries).

The allowance is composed of general reserves and specific reserves.  General reserves are determined by applying loss percentages to segments of the portfolio.  The loss percentages are based on each segment’s historical loss experience, generally over the past twelve to eighteen months, and adjustment factors derived from conditions in the Company’s internal and external environment.  All loans considered to be impaired are evaluated on an individual basis to determine specific reserve allocations in accordance with GAAP.  Loans for which specific reserves are provided are excluded from the calculation of general reserves.

Loans acquired in business combinations are initially recorded at fair value, which includes an estimate of credit losses expected to be realized over the remaining lives of the loans, and therefore no corresponding allowance for loan losses is recorded for these loans at acquisition. Methods utilized to estimate any subsequently required allowance for loan losses for acquired loans not deemed credit-impaired at acquisition are similar to originated loans; however, the estimate of loss is based on the unpaid principal balance and then compared to any remaining unaccreted purchase discount. To the extent that the calculated loss is greater than the remaining unaccreted purchase discount, an allowance is recorded for such difference.

The Company has an internal loan review department that is independent of the lending function to challenge and corroborate the loan grade assigned by the lender and to provide additional analysis in determining the adequacy of the allowance for loan losses.

13

A rollforward of the activity within the allowance for loan losses by loan type and recorded investment in loans for the nine months ended September 30, 2013 and 2012 is as follows (in thousands):

	September 30, 2013
				Real Estate
	Coml, Fin, and Agric			Construction			Commercial			Residential			Consumer			Finance  Leases  Coml			Other		Total
Allowance for loan losses:
Beginning balance	$	1,535		$	2,147		$	2,166		$	936		$	543		$	41		$	2	$	7,370
Charge-offs		(461	)		-			(18	)		(129	)		(558	)		-			-		(1,166	)
Recoveries		61			5			21			34			92			-			-		213
Provision		3,090			(1,081	)		(661	)		(46	)		962			(16	)		2		2,250
Ending balance	$	4,225		$	1,071		$	1,508		$	795		$	1,039		$	25		$	4	$	8,667
Ending balance:
individually evaluated for impairment	$	419		$	36		$	54		$	55		$	134		$	-		$	-	$	698
Ending balance:
collectively evaluated for impairment	$	3,806		$	1,035		$	1,454		$	740		$	905		$	25		$	4	$	7,969
Loans:
Ending balance	$	423,073		$	76,213		$	401,080		$	142,431		$	94,722		$	5,340		$	2,164	$	1,145,023
Ending balance:
individually evaluated for impairment	$	1,450		$	164		$	2,285		$	994		$	322		$	-		$	-	$	5,215
Ending balance:
collectively evaluated for impairment	$	421,623		$	76,049		$	398,080		$	141,136		$	94,400		$	5,340		$	2,164	$	1,138,792
Ending balance:
loans acquired with deteriorated credit quality	$	-		$	-		$	715		$	301		$	-		$	-		$	-	$	1,016

14

	September 30, 2012
				Real Estate
	Coml, Fin, and Agric			Construction		Commercial			Residential			Consumer			Finance  Leases Coml		Other		Total
Allowance for loan losses:
Beginning balance	$	1,734		$	1,661	$	2,215		$	936		$	710		$	19	$	1	$	7,276
Charge-offs		(683	)		-		(495	)		(126	)		(395	)		-		-		(1,699	)
Recoveries		169			9		-			3			66			-		-		247
Provision		574			378		282			114			197			4		1		1,550
Ending balance	$	1,794		$	2,048	$	2,002		$	927		$	578		$	23	$	2	$	7,374
Ending balance:
individually evaluated for impairment	$	461		$	40	$	64		$	-		$	95		$	-	$	-	$	660
Ending balance:
collectively evaluated for impairment	$	1,333		$	2,008	$	1,938		$	927		$	483		$	23	$	2	$	6,714
Loans:
Ending balance	$	266,046		$	57,727	$	293,579		$	110,735		$	73,334		$	5,041	$	2,371	$	808,833
Ending balance:
individually evaluated for impairment	$	2,302		$	926	$	3,144		$	1,771		$	299		$	-	$	-	$	8,442
Ending balance:
collectively evaluated for impairment	$	263,744		$	56,801	$	290,435		$	108,964		$	73,035		$	5,041	$	2,371	$	800,391

Non-Accrual and Past Due Loans

Loans are considered past due if the required principal and interest payment have not been received as of the date such payments were due.  Loans are placed on non-accrual status when, in management’s opinion, the probability of collection of interest is deemed insufficient to warrant further accrual.  For loans placed on non-accrual status, the accrual of interest is discontinued and subsequent payments received are applied to the principal balance.  Interest income is recorded after principal has been satisfied and as payments are received.  Non-accrual loans may be returned to accrual status if all principal and interest amounts contractually owed are reasonably assured of repayment within a reasonable period and there is a period of at least six months to one year of repayment performance by the borrower depending on the contractual payment terms.

15

An age analysis of past due loans (including both accruing and non-accruing loans) is as follows (in thousands):

	September 30, 2013 (1)
	30-59 Days Past Due		60-89 Days  Past Due		Greater than  90 Days Past  Due		Total Past Due		Current		Total Loans		Recorded  Investment >  90 days and Accruing
Commercial, financial, and agricultural	$	1,934	$	150	$	1,454	$	3,538	$	419,535	$	423,073	$	33
Commercial real estate - construction		58		-		129		187		57,674		57,861		-
Commercial real estate - other		3,815		102		2,903		6,820		394,260		401,080		665
Consumer - credit card		36		3		33		72		5,773		5,845		33
Consumer - other		510		53		325		888		87,989		88,877		13
Residential - construction		-		-		-		-		18,352		18,352		-
Residential - prime		1,968		144		1,064		3,176		139,255		142,431		-
Residential - subprime		-		-		-		-		-		-		-
Other loans		127		4		-		131		2,033		2,164		-
Finance leases commercial		-		-		-		-		5,340		5,340		-
	$	8,448	$	456	$	5,908	$	14,812	$	1,130,211	$	1,145,023	$	744

	December 31, 2012 (1)
	30-59 Days  Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total  Past Due		Current		Total Loans		Recorded  Investment > 90 days and Accruing
Commercial, financial, and agricultural	$	2,220	$	321	$	2,580	$	5,121	$	310,534	$	315,655	$	1,019
Commercial real estate - construction		66		96		101		263		58,087		58,350		-
Commercial real estate - other		4,123		2,108		3,577		9,808		404,576		414,384		952
Consumer - credit card		24		2		15		41		6,766		6,807		15
Consumer - other		421		134		186		741		83,013		83,754		-
Residential - construction		-		-		-		-		16,984		16,984		-
Residential - prime		1,140		239		1,121		2,500		140,358		142,858		-
Residential - subprime		-		-		-		-		-		-		-
Other loans		87		-		-		87		2,292		2,379		-
Finance leases commercial		-		-		-		-		5,769		5,769		-
	$	8,081	$	2,900	$	7,580	$	18,561	$	1,028,379	$	1,046,940	$	1,986

Non-accrual loans are as follows (in thousands):

	September 20, 2013 (1)		December 31, 2012 (1)
Commercial, financial, and agricultural	$	1,488	$	1,777
Commercial real estate – construction		166		941
Commercial real estate - other		2,363		3,009
Consumer - credit card		-		-
Consumer - other		352		409
Residential - construction		-		-
Residential - prime		1,391		2,140
Residential - subprime		-		-
Other loans		-		-
Finance leases commercial		-		-
	$	5,760	$	8,276

⁽¹⁾ Balances have been adjusted from previously reported amounts for discounts associated with purchase credit impaired loans.

16

The amount of interest that would have been recorded on non-accrual loans, had the loans not been classified as non-accrual, totaled approximately $431,000 and $502,000 for the nine months ended September 30, 2013 and 2012, respectively.  Interest actually received on non-accrual loans at September 30, 2013 and 2012 was $246,000 and $25,000, respectively.

Impaired Loans

Loans are considered impaired when, based upon current information, it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  All loans classified as special mention, substandard, or doubtful, based on credit risk rating factors, and are reviewed for impairment.  An allowance for each impaired loan is calculated based on the present value of expected future cash flows discounted at the loan’s effective interest rate or at the loan’s observable market price or the fair value of the collateral if the loan is collaterally dependent.  All impaired loans are reviewed, at a minimum, on a quarterly basis.  Existing valuations are reviewed to determine if additional discounts or new appraisals are required.  After this review, when comparing the resulting collateral valuation to the outstanding loan balance, if the discounted collateral value exceeds the loan balance no specific allocation is reserved.  Acquired impaired loans are generally not subject to individual evaluation for impairment and are not reported with impaired loans or troubled debt restructurings, even if they would otherwise qualify for such treatment.

Loans that are individually evaluated for impairment are as follows (in thousands):

	September 30, 2013
	Recorded  Investment		Unpaid  Principal  Balance		Related Allowance		Average  Recorded  Investment		Interest Income Recognized
With no related allowance recorded:
Commercial, financial, and agricultural	$	423	$	563	$	-	$	520	$	3
Commercial real estate – construction		63		63		-		64		-
Commercial real estate – other		1,921		2,395		-		2,137		6
Consumer – other		74		74		-		67		1
Residential – prime		576		596		-		622		5
Subtotal:	$	3,057	$	3,691	$	-	$	3,410	$	15
With an allowance recorded:
Commercial, financial, and agricultural		1,027		1,141		419		1,029		2
Commercial real estate – construction		101		101		36		149		1
Commercial real estate – other		364		364		54		283		11
Consumer – other		248		248		134		252		1
Residential – prime		418		418		55		387		1
Subtotal:	$	2,158	$	2,272	$	698	$	2,100	$	16
Totals:
Commercial		3,899		4,627		509		4,182		23
Consumer		322		322		134		319		2
Residential		994		1,014		55		1,009		6
Grand total:	$	5,215	$	5,963	$	698	$	5,510	$	31

17

	December 31, 2012
	Recorded Investment		Unpaid  Principal  Balance		Related  Allowance		Average  Recorded Investment		Interest  Income  Recognized
With no related allowance recorded:
Commercial, financial, and agricultural	$	564	$	675	$	-	$	861	$	5
Commercial real estate – construction		771		770		-		834		1
Commercial real estate – other		2,530		3,059		-		1,780		38
Consumer – other		114		122		-		81		1
Residential – prime		1,575		1,575		-		1,213		26
Subtotal:	$	5,554	$	6,201	$	-	$	4,769	$	71
With an allowance recorded:
Commercial, financial, and agricultural		1,072		1,072		391		1,128		21
Commercial real estate – construction		165		165		57		85		7
Commercial real estate – other		381		381		35		811		3
Consumer – other		216		216		114		228		6
Residential – prime		52		52		30		172		4
Subtotal:	$	1,886	$	1,886	$	627	$	2,424	$	41
Totals:
Commercial		5,483		6,122		483		5,499		75
Consumer		330		338		114		309		7
Residential		1,627		1,627		30		1,385		30
Grand total:	$	7,440	$	8,087	$	627	$	7,193	$	112

Credit Quality

The Company manages credit risk by observing written underwriting standards and lending policy established by the Board of Directors and management to govern all lending activities.  The risk management program requires that each individual loan officer review his or her portfolio on a quarterly basis and assign recommended credit ratings on each loan.  These efforts are supplemented by independent reviews performed by a loan review officer and other validations performed by the internal audit department.  The results of the reviews are reported directly to the Audit Committee of the Board of Directors.

Loans can be classified into the following three risk rating grades: pass, special mention, and substandard/doubtful.  Factors considered in determining a risk rating grade include debt service capacity, capital structure/liquidity, management, collateral quality, industry risk, company trends/operating performance, repayment source, revenue diversification/customer concentration, quality of financial information, and financing alternatives.  Pass grade signifies the highest quality of loans to loans with reasonable credit risk, which may include borrowers with marginally adequate financial performance, but have the ability to repay the debt.  Special mention loans have potential weaknesses that warrant extra attention from the loan officer and other management personnel, but still have the ability to repay the debt.  Substandard classification includes loans with well-defined weaknesses with risk of potential loss.  Loans classified as doubtful are considered to have little recovery value and are charged off.

18

The following tables present the classes of loans by risk rating (in thousands):

	September 30, 2013
Commercial Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Commercial, Financial, and Agricultural		Commercial Real Estate Construction		Commercial Real Estate Other		Commercial Total		% of Total Commercial
Pass	$	415,480	$	56,932	$	378,331	$	850,743		96.46	%
Special mention		2,581		-		4,500		7,081		0.80	%
Substandard		4,771		929		18,145		23,845		2.70	%
Doubtful		241		-		104		345		0.04	%
	$	423,073	$	57,861	$	401,080	$	882,014		100.00	%

Residential Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Residential Construction		Residential Prime		Residential Subprime		Residential  Total		% of Total  Residential
Pass	$	18,335	$	138,424	$	-	$	156,759		97.50	%
Special mention		-		727		-		727		0.45	%
Substandard		17		3,280		-		3,297		2.05	%
	$	18,352	$	142,431	$	-	$	160,783		100.00	%

Consumer and Commercial Credit Exposure
Credit Risk Profile Based on Payment Activity
	Consumer  Credit Card		Consumer  Other		Finance Leases  Commercial		Other Loans		Total		% of Total
Performing	$	5,811	$	88,518	$	5,340	$	2,164	$	101,833		99.62	%
Nonperforming		34		359		-		-		393		0.38	%
	$	5,845	$	88,877	$	5,340	$	2,164	$	102,226		100.00	%

19

	December 31, 2012
Commercial Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Commercial,  Financial, and Agricultural		Commercial  Real Estate  Construction		Commercial  Real Estate  Other		Commercial  Total		% of Total Commercial
Pass	$	304,219	$	54,737	$	396,077	$	755,033		95.76	%
Special Mention		5,748		684		6,224		12,656		1.61	%
Substandard		4,503		2,925		7,514		14,942		1.90	%
Doubtful		1,185		4		4,569		5,758		0.73	%
	$	315,655	$	58,350	$	414,384	$	788,389		100.00	%

Residential Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Residential  Construction		Residential Prime		Residential Subprime		Residential  Total		% of Total  Residential
Pass	$	16,785	$	137,681	$	-	$	154,466		96.64	%
Special mention		-		1,612		-		1,612		1.01	%
Substandard		199		3,565		-		3,764		2.35	%
	$	16,984	$	142,858	$	-	$	159,842		100.00	%

Consumer and Commercial Credit Exposure
Credit Risk Profile Based on Payment Activity
	Consumer Credit Card		Consumer Other		Finance Leases  Commercial		Other Loans		Total		% of Total
Performing	$	6,792	$	83,347	$	5,769	$	2,379	$	98,287		99.57	%
Nonperforming		15		407		-		-		422		0.43	%
	$	6,807	$	83,754	$	5,769	$	2,379	$	98,709		100.00	%

Troubled Debt Restructurings

A troubled debt restructuring (“TDR”) is a restructuring of a debt made by the Company to a debtor for economic or legal reasons related to the debtor’s financial difficulties that it would not otherwise consider.  The Company grants the concession in an attempt to protect as much of its investment as possible.

Information about the Company’s TDRs is as follows (in thousands):

	September 30, 2013
	Current		Past Due  Greater than 30 Days		Nonaccrual TDRs		Total TDRs
Commercial, financial, and agricultural	$	23	$	-	$	343	$	366
Real estate - commercial		167		-		-		167
	$	190	$	-	$	343	$	533

20

	December 31, 2012
	Current		Past Due Greater than  30 Days		Nonaccrual TDRs		Total TDRs
Commercial, financial, and agricultural	$	-	$	-	$	353	$	353
Real estate - commercial		4,709		-		-		4,709
	$	4,709	$	-	$	353	$	5,062

The $4.5 million decrease from December 31, 2012 resulted primarily from payoffs related to two commercial credits previously classified as TDRs. During the three months ended September 30, 2013, there were no loans identified as a TDR, and there were no defaults on any loans that were modified as TDRs during the preceding twelve months.  During the three months ended September 30, 2012, there were no new loans identified as TDRs, and there were no defaults on any loans that were modified as TDRs during the preceding twelve months.  During the nine months ended September 30, 2013, one loan with a pre-modification balance of $27,000 was identified as a TDR, and there were no defaults on any loans that were modified as TDRs during the preceding twelve months.  During the nine months ended September 30, 2012, there were no new TDRs identified.  Three TDRs totaling $249,000 defaulted during the nine months ended September 30, 2012.  For purposes of the determination of an allowance for loan losses on these TDRs, as an identified TDR, the Company considers a loss probable on the loan and, as a result is reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology.  If it is determined losses are probable on such TDRs, either because of delinquency or other credit quality indicator, the Company establishes specific reserves for these loans.As of September 30, 2013, there were no commitments to lend additional funds to debtors owing sums to the Company whose terms have been modified in TDRs.

5.  Other Comprehensive Income (Loss)

The following is a summary of the tax effects allocated to each component of other comprehensive income (loss) (in thousands):

	Three Months Ended September 30,
	2013								2012
	Before Tax Amount			Tax Effect		Net of Tax  Amount			Before Tax  Amount			Tax Effect			Net of Tax Amount
Other comprehensive income (loss):
Securities available-for-sale:
Change in unrealized gain during period	$	(95	)	$	33	$	(62	)	$	1,417		$	(496	)	$	921
Reclassification adjustment for gains included in net income		(25	)		9		(16	)		(69	)		24			(45	)
Total other comprehensive income (loss)	$	(120	)	$	42	$	(78	)	$	1,348		$	(472	)	$	876

	Nine Months Ended September 30,
	2013								2012
	Before Tax Amount			Tax Effect		Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount
Other comprehensive income (loss):
Securities available-for-sale:
Change in unrealized gain during period	$	(10,203	)	$	3,571	$	(6,632	)	$	2,725		$	(954	)	$	1,771
Reclassification adjustment for gains included in net income		(229	)		80		(149	)		(204	)		71			(133	)
Total other comprehensive income (loss)	$	(10,432	)	$	3,651	$	(6,781	)	$	2,521		$	(883	)	$	1,638

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The reclassifications out of accumulated other comprehensive income into net income are presented below (in thousands):

	Three Months Ended September 30,
	2013				2012
Details about  Accumulated Other Comprehensive Income Components	Reclassifications Out  of Accumulated Other Comprehensive  Income			Income Statement Line  Item	Reclassifications Out  of Accumulated Other  Comprehensive  Income			Income Statement Line Item
Unrealized gains and losses on securities available-for-sale:
	$	(25	)	Gain on securities, net	$	(69	)	Gain on securities, net
		9		Tax expense		24		Tax expense
	$	(16	)	Net of tax	$	(45	)	Net of tax

	Nine Months Ended September 30,
	2013				2012
Details about  Accumulated Other  Comprehensive Income Components	Reclassifications Out  of Accumulated Other  Comprehensive  Income			Income Statement Line  Item	Reclassifications Out  of Accumulated Other  Comprehensive  Income			Income Statement Line  Item
Unrealized gains and losses on securities available-for-sale:
	$	(229	)	Gain on securities, net	$	(204	)	Gain on securities, net
		80		Tax expense		71		Tax expense
	$	(149	)	Net of tax	$	(133	)	Net of tax

6.  Earnings Per Common Share

Following is a summary of the information used in the computation of earnings per common share (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Net earnings available to common shareholders	$	3,072	$	2,249	$	9,479	$	6,833
Dividends on Series C preferred stock		100		-		300		-
Adjusted net earnings available to common shareholders	$	3,172	$	2,249	$	9,779	$	6,833
Weighted average number of common shares outstanding used in computation of basic earnings per common share		11,253		10,478		11,243		10,471
Effect of dilutive securities:
Stock options		51		29		47		17
Restricted stock		-		11		-		11
Preferred stock		565		-		563		-
Weighted average number of common shares outstanding plus effect of dilutive securities used in computation of diluted earnings per common share		11,869		10,518		11,853		10,499

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Options to acquire 134,611 and 18,331 shares of common stock were not included in computing diluted earnings per share for the quarters and nine months ended September 30, 2013 and 2012, respectively, because the effects of these shares were anti-dilutive as a result of the exercise price of such options.  A total of 104,384 shares subject to an outstanding warrant issued in connection with the Capital Purchase Plan transaction were anti-dilutive as a result of their exercise price and not included in the computation of diluted earnings per share for the quarter and nine months ended September 30, 2012.

7.Declaration of Dividends

A first quarter dividend of $0.07 per share for holders of common stock of record on March 15, 2013 was declared on January 31, 2013, and was paid on April 1, 2013.  On January 31, 2013, the Company also declared a 1.00% dividend for holders of its Series C preferred stock of record on April 1, 2013, which was paid on April 15, 2013.  On May 22, 2013, the Company declared a second quarter dividend of $0.08 per share for holders of common stock of record on June 14, 2013, and was paid on July 1, 2013.  On May 22, 2013, the Company also declared a 1.00% dividend for holders of its Series C preferred stock of record on July 1, 2013, which was paid on July 15, 2013.  A third quarter dividend was declared on July 24, 2013, in the amount of $0.08 per share for holders of common stock of record on September 16, 2013, payable on October 1, 2013.  On July 24, 2013, the Company also declared a 1.00% dividend for holders of its Series C preferred stock of record on October 1, 2013, payable on October 15, 2013.  On October 16, 2013, the Company declared a fourth quarter dividend of $0.08 per share for holders of common stock of record on December 16, 2013 to be paid on January 2, 2014.  On October 16, 2013, the Company also declared a 1.00% dividend for holders of its Series C preferred stock of record on January 2, 2014, payable on January 15, 2014.

8. Goodwill and Intangibles

Changes to the carrying amount of goodwill for the nine months ended September 30, 2013 are provided in the following table (in thousands):

Balance, December 31, 2012	$	42,781
1st quarter 2013 adjustment to goodwill		(105	)
2nd quarter 2013 adjustment to goodwill		(190	)
Balance, September 30, 2013	$	42,486

The adjustments to goodwill made during the nine months ended September 30, 2013 resulted from reclassification of a $415,000 liability assumed through the PSB acquisition, from a $254,000 market value adjustment on two bonds held in the PSB investment portfolio at acquisition and from a $190,000 increase to the amount of income tax receivable recorded from the PSB acquisition.  The adjustments were made as additional information existing at the time of the acquisition was reviewed and affected the amount recorded for the assumed liability and the market value of the two bonds.  Net of deferred taxes, the adjustment resulted in a $295,000 reduction to goodwill recorded in the PSB acquisition.  The adjustments to goodwill had no impact on net earnings or shareholders’ equity.

A summary of core deposit intangible assets as of September 30, 2013 and December 31, 2012 is as follows (in thousands):

	September 30, 2013			December 31, 2012
Gross carrying amount	$	11,674		$	11,674
Less accumulated amortization		(3,457	)		(2,627	)
Net carrying amount	$	8,217		$	9,047

9.Fair Value Measurement

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market.  These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

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Following is a description of valuation methodologies used for assets and liabilities which are either recorded or disclosed at fair value.

Cash and Cash Equivalents—The carrying value of cash and cash equivalents is a reasonable estimate of fair value.

Time Deposits Held in Banks—Fair values for fixed-rate time deposits are estimated using a discounted cash flow analysis that applies interest rates currently being offered on time deposits of similar terms of maturity.

Securities Available-for-Sale—Securities available-for-sale are recorded at fair value on a recurring basis.  Fair value measurement is based upon quoted prices, if available.  If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.  Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds.  Securities are classified as Level 2 within the valuation hierarchy when the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond’s terms and conditions, among other things. Level 2 inputs are used to value U.S. Agency securities, mortgage-backed securities, asset-backed securities, municipal securities, single issue trust preferred securities, certain pooled trust preferred securities, collateralized debt obligations and certain equity securities that are not actively traded.

Securities Held-to-Maturity—The fair value of securities held-to-maturity is estimated using the same measurement techniques as securities available-for-sale.

Other Investments—The carrying value of other investments is a reasonable estimate of fair value.

Loans—For disclosure purposes, the fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings.  For variable rate loans, the carrying amount is a reasonable estimate of fair value.  The Company does not record loans at fair value on a recurring basis.  No adjustment to fair value is taken related to illiquidity discounts.  However, from time to time, a loan is considered impaired and an allowance for loan losses is established.  Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.  Once a loan is identified as individually impaired, management uses one of three methods to measure impairment, which, include collateral value, market value of similar debt, and discounted cash flows.  Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.  Impaired loans where an allowance is established based on the fair value of collateral or where the loan balance has been charged down to fair value require classification in the fair value hierarchy.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and adjusts the appraisal value by taking an additional discount for market conditions and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.

For non-performing loans, collateral valuations currently in file are reviewed for acceptability in terms of timeliness and applicability.  Although each determination is made based on the facts and circumstances of each credit, generally valuations are no longer considered acceptable when there has been physical deterioration of the property from when it was last appraised, or there has been a significant change in the underlying assumptions of the appraisal.  If the valuation is deemed to be unacceptable, a new appraisal is ordered.  New appraisals are typically received within 4-6 weeks.  While awaiting new appraisals, the valuation in the file is utilized, net of discounts.  Discounts are derived from available relevant market data, selling costs, taxes, and insurance.  Any perceived collateral deficiency utilizing the discounted value is specifically reserved (as required by ASC Topic 310) until the new appraisal is received or charged off.  Thus, provisions or charge-offs are recognized in the period the credit is identified as non-performing.

The following sources are utilized to set appropriate discounts: in-market real estate agents, current local sales data, bank history for devaluation of similar property, Sheriff’s valuations and buy/sell contracts.  If a real estate agent is used to market and sell the property, values are discounted 10% for selling costs.  Additional discounts may be applied if research from the above sources indicates a discount is appropriate given devaluation of similar property from the time of the initial valuation.

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Other Real Estate—Other real estate (“ORE”) properties are adjusted to fair value upon transfer of the loans to other real estate, and annually thereafter to insure other real estate assets are carried at the lower of carrying value or fair value.  Exceptions to obtaining initial appraisals are properties where a buy/sell agreement exists for the loan value or greater, or where a Sheriff’s valuation has been received for properties liquidated through a Sheriff sale.  Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the ORE as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and adjusts the appraisal value by taking an additional discount for market conditions and there is no observable market prices, the Company records the ORE asset as nonrecurring Level 3.

Cash Surrender Value of Life Insurance Policies—Fair value for life insurance cash surrender value is based on cash surrender values indicated by the insurance companies.

Deposits—The fair value of demand deposits, savings accounts, NOW accounts, and money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.  The estimated fair value does not include customer related intangibles.

Securities Sold Under Agreements to Repurchase—The fair value approximates the carrying value of securities sold under agreements to repurchase due to their short-term nature.

Notes payable—The fair value approximates the carrying value of short-term notes payable due to their short-term nature.  The fair value of long-term notes payable is estimated using a discounted cash flow analysis that applies interest rates currently being offered on similar types of borrowings with similar terms.

Junior Subordinated Debentures—For junior subordinated debentures that bear interest on a floating basis, the carrying amount approximates fair value.  For junior subordinated debentures that bear interest on a fixed rate basis, the fair value is estimated using a discounted cash flow analysis that applies interest rates currently being offered on similar types of borrowings.

Commitments to Extend Credit, Standby Letters of Credit and Credit Card Guarantees—Because commitments to extend credit and standby letters of credit are generally short-term and made using variable rates, the carrying value and estimated fair value associated with these instruments are immaterial.

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Assets Recorded at Fair Value

The table below presents information about certain assets and liabilities measured at fair value on a recurring basis (in thousands):

			Fair Value Measurements at September 30, 2013 using:
Description	Assets / Liabilities Measured at Fair Value  at September 30, 2013		Level 1		Level 2		Level 3
Available-for-sale securities:
U.S. Government sponsored enterprises	$	11,419	$	-	$	11,419	$	-
Obligations of state and political subdivisions		66,524		-		66,524		-
GSE mortgage-backed securities		152,574		-		152,574		-
Other asset-backed securities		25,722		-		25,722		-
Collateralized mortgage obligations: residential		74,315		-		74,315		-
Collateralized mortgage obligations: commercial		27,530		-		27,530		-
Collateralized debt obligations		591		-		591		-
	$	358,675	$	-	$	358,675	$	-

			Fair Value Measurements at December 31, 2012 using:
Description	Assets / Liabilities Measured at Fair Value  at December 31, 2012		Level 1		Level 2		Level 3
Available-for-sale securities:
U.S. Government sponsored enterprises	$	13,424	$	-	$	13,424	$	-
Obligations of state and political subdivisions		87,421		-		87,421		-
GSE mortgage-backed securities		178,819		-		178,819		-
Collateralized mortgage obligations: residential		101,986		-		101,986		-
Collateralized mortgage obligations: commercial		29,761		-		29,761		-
Other asset-backed securities		12,742		-		12,742		-
Collateralized debt obligations		464		-		464		-
	$	424,617	$	-	$	424,617	$	-

Certain assets and liabilities are measured at fair value on a nonrecurring basis and are included in the table below (in thousands).  Impaired loans are Level 2 assets measured using appraisals from external parties of the collateral less any prior liens.  Other real estate properties are also Level 2 assets measured using appraisals from external parties.  Acquired loans are Level 3 assets measured on a nonrecurring basis.

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			Fair Value Measurements Using
	September 30, 2013		Level 1		Level 2		Level 3
Assets
Acquired loans with deteriorated credit quality	$	1,016	$	-	$	-	$	1,016
Other real estate		6,672		-		6,672		-
Impaired loans, excluding acquired loans		2,152		-		2,152		-
Total	$	9,840	$	-	$	8,824	$	1,016

			Fair Value Measurements Using
	December 31, 2012		Level 1		Level 2		Level 3
Assets
Acquired loans with deteriorated credit quality	$	4,521	$	-	$	-	$	4,521
Other real estate		7,496		-		7,496		-
Impaired loans, excluding acquired loans		2,245		-		2,245		-
Total	$	14,262	$	-	$	9,741	$	4,521

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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The carrying amounts and estimated fair values of the Company’s financial instruments are as follows at September 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements at September 30, 2013 Using:
	Carrying  Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	43,434	$	43,434	$	-	$	-
Securities available-for-sale		358,675		-		358,675		-
Securities held-to-maturity		159,141		-		156,117		-
Other investments		10,951		10,951		-		-
Loans, net		1,136,356		-		-		1,145,675
Cash surrender value of life insurance policies		13,392		-		13,392		-
Financial liabilities:
Non-interest-bearing deposits		380,048		-		380,048		-
Interest-bearing deposits		1,126,078		-		878,091		249,227
Securities sold under agreements to repurchase		73,909		73,909		-		-
Notes payable		53,059		-		25,000		29,212
Junior subordinated debentures		29,384		-		22,167		7,590

			Fair Value Measurements at December 31, 2012 Using:
	Carrying Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	73,573	$	73,573	$	-	$	-
Time deposits held in banks		881		-		-		883
Securities available-for-sale		424,617		-		424,617		-
Securities held-to-maturity		153,524		-		156,924		-
Other investments		8,310		8,310		-		-
Loans, net		1,039,570		-		-		1,046,495
Cash surrender value of life insurance policies		13,183		-		13,183		-
Financial liabilities:
Non-interest-bearing deposits		380,557		-		380,557		-
Interest-bearing deposits		1,171,347		-		859,183		314,783
Securities sold under agreements to repurchase		41,447		41,447		-		-
Notes payable		29,128		-		-		29,128
Junior subordinated debentures		29,384		-		22,167		7,776

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

MidSouth Bancorp, Inc. (the “Company”) is a financial holding company headquartered in Lafayette, Louisiana that conducts substantially all of its business through its wholly owned subsidiary bank, MidSouth Bank, N.A. (the “Bank”).  We offer complete banking services to commercial and retail customers in Louisiana and south and central Texas with 61 locations and are connected to a worldwide ATM network that provides customers with access to more than 50,000 surcharge-free ATMs.  We are community oriented and focus primarily on offering commercial and consumer loan and deposit services to individuals, small businesses, and middle market businesses.

The following discussion and analysis identifies significant factors that have affected our financial position and operating results during the periods included in the financial statements accompanying this report.  We encourage you to read this discussion in conjunction with our consolidated financial statements and the notes thereto presented herein and with the financial statements, the notes thereto, and related Management’s Discussion and Analysis of Financial Condition and Results of Operation in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Forward-Looking Statements

Certain statements included in this Report, other than statements of historical fact, are forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the regulations thereunder), which are intended to be covered by the safe harbors created thereby. Forward-looking statements include, but are not limited to certain statements under the captions “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “will,” “would,” “could,” “should,” “guidance,” “potential,” “continue,” “project,” “forecast,” “confident,” and similar expressions are typically used to identify forward-looking statements.  These statements are based on assumptions and assessments made by management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.  Any forward-looking statements are not guarantees of our future performance and are subject to risks and uncertainties and may be affected by various factors that may cause actual results, developments and business decisions to differ materially from those in the forward-looking statements.  Some of the factors that may cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements include the factors discussed under the caption “Risk Factors” in our 2012 Annual Report on form 10-K and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report and the following:

· changes in interest rates and market prices that could affect the net interest margin, asset valuation, and expense levels;

· changes in local economic and business conditions, including, without limitation, changes related to the oil and gas industries, that could adversely affect customers and their ability to repay borrowings under agreed upon terms, adversely affect the value of the underlying collateral related to their borrowings, and reduce demand for loans;

· increased competition for deposits and loans which could affect compositions, rates and terms;

· changes in the levels of prepayments received on loans and investment securities that adversely affect the yield and value of the earning assets;

· a deviation in actual experience from the underlying assumptions used to determine and establish our allowance for loan losses (“ALL”), which could result in greater than expected loan losses;

· changes in the availability of funds resulting from reduced liquidity or increased costs;

· the timing, ability to complete and the impact of proposed and/or future acquisitions, the success or failure of integrating acquired operations, and the ability to capitalize on growth opportunities upon entering new markets;

· the ability to acquire, operate, and maintain effective and efficient operating systems;

· increased asset levels and changes in the composition of assets that would impact capital levels and regulatory capital ratios;

· loss of critical personnel and the challenge of hiring qualified personnel at reasonable compensation levels;

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· legislative and regulatory changes, including the changes in the regulatory capital framework under the Federal Reserve Board’s Basel III regulatory capital reforms, the impact of regulations under the Dodd-Frank  Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), including the implementation of the Consumer Financial Protection Bureau, and other changes in banking, securities and tax laws and regulations and their application by our regulators, changes in the scope and cost of Federal Deposit Insurance Corporation (“FDIC”) insurance and other coverage;

· regulations and restrictions resulting from our participation in government sponsored programs such as the U.S. Treasury’s Small Business Lending Fund, including potential retroactive changes in such programs;

· changes in accounting principles, policies, and guidelines applicable to financial holding companies and banking;

· acts of war, terrorism, cyber intrusion, weather, or other catastrophic events beyond our control; and

· the ability to manage the risks involved in the foregoing.

We can give no assurance that any of the events anticipated by the forward-looking statements will occur or, if any of them does, what impact they will have on our results of operations and financial condition.  We disclaim any intent or obligation to publicly update or revise any forward-looking statements, regardless of whether new information becomes available, future developments occur or otherwise.

Critical Accounting Policies

Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of the consolidated financial statements.  Our significant accounting policies are described in the notes to the consolidated financial statements included in this report. The accounting principles we follow and the methods of applying these principles conform to accounting principles generally accepted in the United States of America (“GAAP”) and general banking practices.  Our most critical accounting policy relates to the determination of the allowance for loan losses, which reflects the estimated losses resulting from the inability of its borrowers to make loan payments.  The determination of the adequacy of the allowance involves significant judgment and complexity and is based on many factors.  If the financial condition of our borrowers were to deteriorate, resulting in an impairment of their ability to make payments, the estimates would be updated and additional provisions for loan losses may be required.  See Asset Quality – Nonperforming Assets and Allowance for Loan Losses and Note 1 and Note 4 of the footnotes to the consolidated financial statements.

Another of our critical accounting policies relates to the valuation of goodwill, intangible assets and other purchase accounting adjustments.  We account for acquisitions in accordance with ASC Topic No. 805, which requires the use of the purchase method of accounting.  Under this method, we are required to record assets acquired and liabilities assumed at their fair value, including intangible assets.  Determination of fair value involves estimates based on internal valuations of discounted cash flow analyses performed, third party valuations, or other valuation techniques that involve subjective assumptions.  Additionally, the term of the useful lives and appropriate amortization periods of intangible assets is subjective.  Resulting goodwill from an acquisition under the purchase method of accounting represents the excess of the purchase price over the fair value of net assets acquired.  Goodwill is not amortized, but is evaluated for impairment annually or more frequently if deemed necessary.  If the fair value of an asset exceeds the carrying amount of the asset, no charge to goodwill is made.  If the carrying amount exceeds the fair value of the asset, goodwill will be adjusted through a charge to earnings.  Given the instability of the economic environment, it is reasonably possible that the methodology of the assessment of potential loan losses and goodwill impairment could change in the near-term or could result in impairment going forward.

A third critical accounting policy relates to deferred tax assets and liabilities.  We record deferred tax assets and deferred tax liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.  Future tax benefits, such as net operating loss carry forwards, are recognized to the extent that realization of such benefits is more likely than not.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.  In the event the future tax consequences of differences between the financial reporting bases and the tax bases of our assets and liabilities results in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such assets is required.  A valuation allowance is provided when it is more likely than not that a portion or the full amount of the deferred tax asset will not be realized.  In assessing the ability to realize the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies.  A deferred tax liability is not recognized for portions of the allowance for loan losses for income tax purposes in excess of the financial statement balance.  Such a deferred tax liability will only be recognized when it becomes apparent that those temporary differences will reverse in the foreseeable future.  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% more likely of being realized on examination.  For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

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Results of Operations

Earnings Analysis

We reported net earnings available to common shareholders of $3.1 million for the third quarter of 2013, compared to net earnings available to common shareholders of $2.2 million reported for the third quarter of 2012.  Diluted earnings for the third quarter of 2013 were $0.27 per common share, compared to $0.21 per common share reported for the third quarter of 2012.

Dividends paid on the Series B Preferred Stock issued to the Treasury as a result of our participation in the Small Business Lending Fund (“SBLF”) totaled $368,000 for the third quarter of 2013 based on a dividend rate of 4.60%.  The Series C Preferred Stock issued in conjunction with the PSB acquisition paid dividends totaling $100,000 for the three months ended September 30, 2013.

Revenues from consolidated operations increased $6.4 million in quarterly comparison and included $1.2 million in purchase accounting adjustments on the 2012 and 2011 acquisitions.  Noninterest income increased $1.2 million in quarterly comparison, from $3.8 million for the three months ended September 30, 2012 to $5.0 million for the three months ended September 30, 2013.  Increases in noninterest income consisted primarily of $454,000 in service charges on deposit accounts and $596,000 in ATM/debit card income due to the acquired branches in the Timber Region.

Noninterest expenses increased $4.9 million for the third quarter 2013 compared to third quarter 2012 and included approximately $1.7 million in operating expenses for the Timber Region and approximately $368,000 in operating costs for four new branches opened in late 2012 and early 2013.  The remaining $2.8 million of increased operating costs consisted primarily of $1.2 million in salaries and benefits costs, $464,000 in occupancy expense, $293,000 in ATM/debit card expense, $117,000 in marketing costs and $173,000 in data processing expenses.  The increased costs were partially offset by a $230,000 decrease in legal and professional fees.  The provision for loan losses increased $150,000 primarily as a result of the loan growth experienced during the third quarter of 2013.  Income tax expense increased $526,000 in quarterly comparison.

In year-over-year comparison, net earnings available to common shareholders increased $2.7 million primarily as a result of a $15.7 million improvement in net interest income and a $3.2 million increase in noninterest income which offset a $14.1 million increase in noninterest expense, a $700,000 increase in provision for loan loss and a $1.5 million increase in income tax expense.  The $15.7 million increase in net interest income included approximately $9.7 million earned from the Timber Region.  An increase in purchase accounting adjustments of $3.2 million in year-to-date comparison also contributed to the increase in net interest income.

Increases in noninterest income consisted primarily of $1.2 million in service charges on deposit accounts and $1.3 million in ATM and debit card income.  Noninterest expenses increased $14.1 million in year-to-date comparison and included approximately $5.0 million in operating expenses for the Timber Region and approximately $1.2 million in operating expenses for the four new branches opened in late 2012 and early 2013.  Increases in noninterest expense, excluding operating expenses in the Timber Region and the new branches, included primarily $3.7 million in salary and benefits costs, $1.4 million in occupancy expense, $486,000 in ATM/debit card expense and $370,000 in corporate development expense.  The increase was partially offset by a $529,000 decrease in expenses on ORE and repossessed assets, excluding expenses on ORE and repossessed assets incurred by the Timber Region.

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Net Interest Income

Our primary source of earnings is net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and other interest-bearing liabilities.  Changes in the volume and mix of earning assets and interest-bearing liabilities combined with changes in market rates of interest greatly affect net interest income.  Our net interest margin on a taxable equivalent basis, which is net interest income as a percentage of average earning assets, was 4.60% and 4.46% for the three months ended September 30, 2013 and 2012, respectively.   Tables 1 and 3 and tables 2 and 4 below analyze the changes in net interest income in the three months ended September 30, 2013 and 2012 and the nine months ended September 30, 2013 and 2012, respectively.

Fully taxable-equivalent (“FTE”) net interest income totaled $19.5 million and $14.2 million for the quarters ended September 30, 2013 and 2012, respectively.  The FTE net interest income increased $5.3 million in prior year quarterly comparison primarily due to a $413.4 million increase in the volume of average earning assets primarily as a result of the PSB acquisition.  The average volume of loans increased $350.2 million in quarterly comparison and the average yield on loans decreased 22 basis points, from 6.46% to 6.24%.  Purchase accounting adjustments on acquired loans added 39 basis points to the average yield on loans for the third quarter of 2013 and 23 basis points to the average yield on loans for the third quarter of 2012.  Net of the impact of the purchase accounting adjustments, average loan yields declined 38 basis points in prior year quarterly comparison, from 6.23% to 5.85%.  Loan yields have declined primarily as the result of a sustained low market interest rate environment.

Investment securities totaled $517.8 million, or 27.8% of total assets at September 30, 2013, versus $458.8 million, or 32.1% of total assets at September 30, 2012.  The investment portfolio had an effective duration of 4.4 years and an unrealized gain of $2.1 million at September 30, 2013.  The average volume of investment securities increased $57.1 million in quarterly comparison primarily due to $152.7 million in securities acquired with the PSB acquisition at year end December 2012, of which $28.8 million were sold early in the first quarter of 2013.  The average tax equivalent yield on investment securities decreased 4 basis points, from 2.63% to 2.59%.  The average yield on all earning assets increased 7 basis points in prior year quarterly comparison, from 4.92% for the third quarter of 2012 to 4.99% for the third quarter of 2013.   Net of the impact of purchase accounting adjustments, the average yield on total earning assets declined 5 basis points, from 4.79% to 4.74% for the three-month periods ended September 30, 2012 and 2013, respectively.

The impact to interest expense of a $335.8 million increase in the average volume of interest bearing liabilities was partially offset by an 11 basis point decrease in the average rate paid on interest bearing liabilities, from 0.62% at September 30, 2012 to 0.51% at September 30, 2013.  Net of purchase accounting adjustments on acquired certificates of deposit and FHLB borrowings, the average rate paid on interest bearing liabilities was 0.71% for the third quarter of 2012 and declined to 0.58% for the third quarter of 2013.

Included in other interest-bearing liabilities is an average of $28.3 million of borrowed funds assumed from PSB, which included FHLB advances and a note payable with First National Bankers Bank.  The FHLB advances are fixed rate advances with rates ranging from 1.99% to 5.06% and have a range of maturities from October 2013 to January 2019.  The FHLB advances are collateralized by a blanket lien on first mortgages and other qualifying loans.  The note payable with First National Bankers Bank requires annual payments of $250,000 and bears an interest rate equal to New York Prime.  Also, included in other interest-bearing liabilities is an average of $25.0 million of short-term FHLB advances that mature in December 2013 and bear an interest rate of 0.15%.  The short-term advances partially funded the loan growth we experienced in the second and third quarters of 2013.

The average rate paid on our junior subordinated debentures decreased 164 basis points from third quarter of 2012 to third quarter of 2013 due to the addition of three variable rate debentures acquired from PSB.  The variable rate debentures carry a floating rate tied to the 3-month LIBOR with added rate variances ranging from plus 170 basis points to plus 330 basis points, adjustable and payable quarterly.  We also have $7.2 million of junior subordinated debentures outstanding that carry a fixed interest rate of 10.20%.

As a result of these changes in volume and yield on earning assets and interest bearing liabilities, the FTE net interest margin increased 14 basis points, from 4.46% for the third quarter of 2012 to 4.60% for the third quarter of 2013.  Net of purchase accounting adjustments on loans, deposits and FHLB borrowings, the FTE margin increased 4 basis points, from 4.26% for the third quarter of 2012 to 4.30% for the third quarter of 2013.

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In year-to-date comparison, FTE net interest income increased $16.1 million primarily due to a $399.1 million increase in the average volume of earning assets that resulted in a $16.6 million increase in interest income.  The average yield on earning assets increased in year-to-date comparison, from 4.95% at September 30, 2012 to 5.11% at September 30, 2013.  Net of a 41 basis point effect of discount accretion on acquired loans, the average yield on earning assets was 4.70% at September 30, 2013.

Interest expense increased in year-over-year comparison primarily due to a $307.5 million increase in the average volume of interest bearing liabilities, from $951.8 million at September 30, 2012 to $1.3 billion at September 30, 2013.  The average rate paid on interest-bearing liabilities decreased 10 basis points, from 0.63% at September 30, 2012 to 0.53% at September 30, 2013.  Net of a 9 basis point effect of premium amortization on acquired certificates of deposit and FHLB advances, the average rate paid on interest bearing liabilities was 0.62% at September 30, 2013.  The FTE net interest margin increased 23 basis points, from 4.48% for the nine months ended September 30, 2012 to 4.71% for the nine months ended September 30, 2013.  Net of purchase accounting adjustments, the FTE net interest margin increased 1 basis point, from 4.23% to 4.24% for the nine months ended September 30, 2012 and 2013, respectively.

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Table 1
Consolidated Average Balances, Interest and Rates
(in thousands)
	Three Months Ended September 30,
	2013								2012
	Average  Volume			Interest		Average Yield/Rate			Average  Volume			Interest		Average  Yield/Rate
Assets
Investment securities 1
Taxable	$	418,964		$	2,171		2.07	%	$	384,958		$	2,048		2.13	%
Tax exempt 2		101,226			1,200		4.74	%		78,115			997		5.11	%
Total investment securities		520,190			3,371		2.59	%		463,073			3,045		2.63	%
Federal funds sold		2,180			1		0.18	%		3,570			2		0.22	%
Time and interest bearing deposits in other banks		22,519			15		0.26	%		20,253			13		0.25	%
Other investments		10,948			80		2.92	%		5,816			55		3.78	%
Total loans 3		1,123,086			17,652		6.24	%		772,838			12,540		6.46	%
Total earning assets		1,678,923			21,119		4.99	%		1,265,550			15,655		4.92	%
Allowance for loan losses		(8,479	)							(7,235	)
Nonearning assets		192,646								140,040
Total assets	$	1,863,090							$	1,398,355
Liabilities and shareholders'
equity
Total interest bearing deposits	$	1,133,126		$	976		0.34	%	$	873,128		$	1,030		0.47	%
Securities sold under repurchase agreements		64,274			204		1.26	%		55,953			197		1.40	%
Federal funds purchased		354			-		-			64			-		-
Other borrowings		51,853			104		0.78	%		-			-		-
Notes payable		1,448			14		3.78	%		-			-		-
Junior subordinated debentures		29,384			335		4.46	%		15,465			241		6.10	%
Total interest bearing liabilities		1,280,439			1,633		0.51	%		944,610			1,468		0.62	%
Demand deposits		388,020								276,764
Other liabilities		6,452								9,926
Shareholders' equity		188,179								167,055
Total liabilities and shareholders' equity	$	1,863,090							$	1,398,355
Net interest income and net interest spread				$	19,486		4.48	%				$	14,187		4.30	%
Net yield on interest earning assets							4.60	%							4.46	%

¹ Securities classified as available-for-sale are included in average balances.  Interest income figures reflect interest earned on such securities.

² Interest income of $415,000 for 2013 and $300,000 for 2012 is added to interest earned on tax-exempt obligations to reflect tax equivalent yields using a tax rate of 35%.

³ Interest income includes loan fees of $1,532,000 for 2013 and $996,000 for 2012.  Nonaccrual loans are included in average balancesand income on such loans is recognized on a cash basis.

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Table 2
Consolidated Average Balances, Interest and Rates
(in thousands)
	Nine Months Ended September 30,
	2013								2012
	Average  Volume			Interest		Average Yield/Rate			Average  Volume			Interest		Average Yield/Rate
Assets
Investment securities 1
Taxable	$	426,544		$	6,481		2.03	%	$	380,154		$	6,265		2.20	%
Tax exempt 2		104,297			3,763		4.81	%		81,774			3,152		5.14	%
Total investment securities		530,841			10,244		2.57	%		461,928			9,417		2.72	%
Federal funds sold		3,910			6		0.20	%		3,657			6		0.22	%
Time and interest bearing deposits in other banks		34,435			70		0.27	%		36,720			73		0.26	%
Other investments		10,113			230		3.03	%		5,737			142		3.30	%
Total loans 3		1,082,679			52,966		6.54	%		754,838			37,298		6.58	%
Total earning assets		1,661,978			63,516		5.11	%		1,262,880			46,936		4.95	%
Allowance for loan losses		(7,691	)							(7,139	)
Nonearning assets		199,655								139,308
Total assets	$	1,853,942							$	1,395,049
Liabilities and shareholders' equity
Total interest bearing deposits	$	1,138,506		$	3,044		0.36	%	$	886,033		$	3,189		0.48	%
Securities sold under repurchase agreements		52,597			565		1.44	%		50,313			564		1.49	%
Federal funds purchased		607			3		0.65	%		22			-		-
Other borrowings		36,587			302		1.09	%		1			-		-
Notes payable		1,660			43		3.42	%		-			-		-
Junior subordinated debentures		29,384			1,007		4.52	%		15,465			733		6.23	%
Total interest bearing liabilities		1,259,341			4,964		0.53	%		951,834			4,486		0.63	%
Demand deposits		395,482								268,348
Other liabilities		8,785								9,694
Shareholders' equity		190,334								165,173
Total liabilities and shareholders' equity	$	1,853,942							$	1,395,049
Net interest income and net interest spread				$	58,552		4.58	%				$	42,450		4.32	%
Net yield on interest earning assets							4.71	%							4.48	%

¹ Securities classified as available-for-sale are included in average balances.  Interest income figures reflect interest earned on such securities.

² Interest income of $1,327,000 for 2013 and $950,000 for 2012 is added to interest earned on tax-exempt obligations to reflect tax equivalent yields using a tax rate of 35%.

³ Interest income includes loan fees of $4,130,000 for 2013 and $2,646,000 for 2012.  Nonaccrual loans are included in average balances and income on such loans is recognized on a cash basis.

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Table 3
Changes in Taxable-Equivalent Net Interest Income
(in thousands)
	Three Months Ended
	September 30, 2013 compared to September 30, 2012
	Total			Change
	Increase			Attributable To
	(Decrease)			Volume			Rates
Taxable-equivalent earned on:
Investment securities
Taxable	$	123		$	177		$	(54	)
Tax exempt		203			278			(75	)
Federal funds sold		(1	)		(1	)		-
Time and interest bearings deposits in other banks		2			2			-
Other investments		25			40			(15	)
Loans, including fees		5,112			5,517			(405	)
Total	$	5,464		$	6,013		$	(549	)
Interest paid on:
Interest bearing deposits	$	(54	)	$	263		$	(317	)
Securities sold under repurchase agreements		7			27			(20	)
Federal funds purchased		-			-			-
Other borrowings		104			104			-
Notes payable		14			14			-
Junior subordinated debentures		94			172			(78	)
Total		165			580			(415	)
Taxable-equivalent net interest income	$	5,299		$	5,433		$	(134	)

Note: In Table 3, changes due to volume and rate have generally been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts to the changes in each.

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Table 4
Changes in Taxable-Equivalent Net Interest Income
(in thousands)
	Nine Months Ended
	September 30, 2013 compared to September 30, 2012
	Total			Change
	Increase			Attributable To
	(Decrease)			Volume			Rates
Taxable-equivalent earned on:
Investment securities
Taxable	$	216		$	728		$	(512	)
Tax exempt		611			823			(212	)
Federal funds sold		-			-			-
Time and interest bearings deposits in other banks		(3	)		(4	)		1
Other investments		88			101			(13	)
Loans, including fees		15,668			16,040			(372	)
Total	$	16,580		$	17,688		$	(1,108	)
Interest paid on:
Interest bearing deposits	$	(145	)	$	786		$	(931	)
Securities sold under repurchase agreements		1			25			(24	)
Federal funds purchased		3			3			-
Other borrowings		284			284			-
Notes payable		61			61			-
Junior subordinated debentures		274			523			(249	)
Total		478			1,682			(1,204	)
Taxable-equivalent net interest income	$	16,102		$	16,006		$	96

Note: In Table 4, changes due to volume and rate have generally been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts to the changes in each.

Non-interest Income

Non-interest income increased $1.2 million in quarterly comparison, from $3.8 million for the three months ended September 30, 2012 to $5.0 million for the three months ended September 30, 2013.  Increases in non-interest income consisted primarily of $454,000 in service charges on deposit accounts and $596,000 in ATM/debit card income due to the acquired branches in the Timber Region.  For the nine-month period ended September 30, 2013, non-interest income totaled $14.4 million compared to $11.2 million, a net increase of $3.2 million year-over-year.  The increase consisted primarily of $1.2 million in service charges on deposit accounts and $1.3 million in ATM and debit card income.  The majority of the increase in service charges on deposit accounts and ATM/debit card income in three and nine month comparisons resulted from the increased transaction volume due to the PSB deposit accounts acquired.

Non-interest Expense

Non-interest expense increased $4.9 million, from $13.6 million in the third quarter of 2012 to $18.5 million in the third quarter of 2013and included approximately $1.7 million in operating expenses for the Timber Region and approximately $368,000 in operating costs for four new branches opened in late 2012 and early 2013.  The remaining $2.8 million of increased operating costs consisted primarily of $1.2 million in salaries and benefits costs, $464,000 in occupancy expense, $293,000 in ATM/debit card expense, $117,000 in marketing costs and $173,000 in data processing expenses.  The increased costs were partially offset by a $230,000 decrease in legal and professional fees.  The provision for loan losses increased $150,000 primarily as a result of the loan growth experienced during the third quarter of 2013.  Income tax expense increased $526,000 in quarterly comparison.

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Non-interest expenses increased $14.1 million in year-to-date comparison and included approximately $5.0 million in operating expenses for the Timber Region and approximately $1.2 million in operating expenses for the four new branches opened in late 2012 and early 2013.  Increases in noninterest expense, excluding operating expenses on the Timber Region and the new branches, included primarily $3.7 million in salary and benefits costs, $1.4 million in occupancy expense, $486,000 in ATM/debit card expense and $370,000 in corporate development expense.  The increase was partially offset by a $529,000 decrease in expenses on ORE and repossessed assets, excluding expenses on ORE and repossessed assets incurred by the Timber Region.

Analysis of Balance Sheet

Total consolidated assets at September 30, 2013 and December 31, 2012 were $1.9 billion.  Deposits totaled $1.5 billion at September 30, 2013, compared to $1.6 billion at December 31, 2012.  Our stable core deposit base, excluding time deposits, accounted for 83% of deposits at September 30, 2013 compared to 80% of deposits at year end 2012.  The low cost of our interest-bearing deposits declined 10 basis points from the 0.46% reported for the year ended December 31, 2012 compared to 0.36% over the nine months ended September 30, 2013.

Securities available-for-sale totaled $358.7 million at September 30, 2013, a decrease of $65.9 million from $424.6 million at December 31, 2012.  The securities available-for-sale portfolio declined primarily due to $55.8 million in sales of securities and $59.4 million in calls, maturities and pay-downs that offset purchases totaling $68.0 million for the first nine months of 2013.  Of the $55.8 million in sales, $41.8 million in securities were identified as under-performing and subsequently sold following a thorough analysis of the investment securities portfolio during the first quarter of 2013.  In addition, $13.9 million in securities were sold during the third quarter in an effort to improve our interest rate risk position.  Securities held-to-maturity increased $5.6 million, from $153.5 million at December 31, 2012 to $159.1 million at September 30, 2013, primarily due to $26.4 million in purchases for the held-to-maturity portfolio that offset $19.6 million in calls, maturities and pay-downs.  The investment securities portfolio had an effective duration of 4.4 years and an unrealized gain of $2.1 million at September 30, 2013.

Loans totaled $1.1 billion at September 30, 2013, compared to $1.0 billion at December 31, 2012.  Total loans increased $96.8 million from year end 2012 primarily due to $54.1 million in commercial loans funded as a result of a small business lending campaign held during the second quarter and third quarter loan growth of $26.5 million.  The commercial loan portfolio grew $107.4 million, or 34.0%, during the first nine months of 2013.   The composition of the Company’s loan portfolio is reflected in Table 5 below.

Table 5
Composition of Loans
(in thousands)
	September 30, 2013			December 31, 2012
Commercial, financial, and agricultural	$	423,073		$	315,655
Lease financing receivable		5,340			5,769
Real estate - construction		76,213			75,334
Real estate - commercial		401,080			414,384
Real estate - residential		142,431			142,858
Installment loans to individuals		94,722			90,561
Other		2,164			2,379
	$	1,145,023		$	1,046,940
Less allowance for loan losses		(8,667	)		(7,370	)
Net loans	$	1,136,356		$	1,039,570

Within the $401.1 million commercial real estate portfolio, $349.2 million is secured by commercial property, $26.1 million is secured by multi-family property, and $25.7 million is secured by farmland.  Of the $349.2 million secured by commercial property, $213.7 million, or 61.2%, is owner-occupied.  Of the $142.4 million residential real estate portfolio, 86.6% represented loans secured by first liens.  We believe our risk within the real estate and construction portfolios is diversified throughout our markets and that current exposure within the two portfolios is sufficiently provided for within the ALL at September 30, 2013.

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Off-Balance Sheet Arrangements

In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the 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, letters of credit and lines of credit.  For the period ended September 30, 2013, we did not engage in any off-balance sheet transactions reasonably likely to have a material impact on our financial condition, results of operations, or cash flows.

Liquidity and Capital

Bank Liquidity

Liquidity is the availability of funds to meet maturing contractual obligations and to fund operations.  The Bank’s primary liquidity needs involve its ability to accommodate customers’ demands for deposit withdrawals as well as customers’ requests for credit.  Liquidity is deemed adequate when sufficient cash to meet these needs can be promptly raised at a reasonable cost to the Bank.

Liquidity is provided primarily by three sources: a stable base of funding sources, an adequate level of assets that can be readily converted into cash, and borrowing lines with correspondent banks.  Although the Bank historically has not utilized brokered deposits, this is a fourth potential source of liquidity, albeit one that is more costly and volatile.  Our core deposits are our most stable and important source of funding.  Cash deposits at other banks, federal funds sold, and principal payments received on loans and mortgage-backed securities provide additional primary sources of liquidity.  Approximately $20.2 million in projected cash flows from securities repayments for the remainder of 2013 provides an additional source of liquidity.

The Bank also has significant borrowing capacity with the FRB-Atlanta and with the FHLB–Dallas.  As of September 30, 2013, we had no borrowings with the FRB-Atlanta.  FHLB-Dallas advances acquired from PSB totaled $26.8 million at September 30, 2013 and are fixed rate advances with rates ranging from 1.99% to 5.06% and have a range of maturities from October 2013 to January 2019.  Short-term FHLB-Dallas advances totaled $25.0 million at September 30, 2013.  The rate on these advances at September 30, 2013 was 0.15%, and they mature in December 2013.  The Bank has the ability to post additional collateral of approximately $228.2 million if necessary to meet liquidity needs.  Additionally, $203.4 million in loan collateral is pledged under a Borrower-in-Custody line with the FRB-Atlanta.  Federal funds purchased totaled $3.9 million at September 30, 2013.  Under existing agreements with the FHLB-Dallas, our borrowing capacity totaled $132.5 million at September 30, 2013.  Additional unsecured borrowing lines totaling $29.6 million are available through correspondent banks.  We utilize these contingency funding alternatives to meet deposit volatility, which is more likely in the current environment, given unusual competitive offeringswithin our markets.

Company Liquidity

At the Company level, cash is needed primarily to meet interest payments on the junior subordinated debentures, dividends on our common stock and dividend payments on the Series B and Series C Preferred Stocks.  The dividend rate on the Series B Preferred Stock issued to the U.S. Treasury for participation in the Small Business Lending Fund (“SBLF”) was 4.60% for the three months ended September 30, 2013 and 4.33% for the three months ended December 31, 2012.  The dividend rate is set at 1.00% for the fourth quarter of 2013 due to attaining the target 10% growth rate in qualified small business loans during the second quarter of 2013.  Beginning March 2016, the dividend rate will increase to 9% per annum.  

On December 28, 2012, the Company issued 756,511 shares of common stock and 99,971 shares of Series C Preferred Stock in connection with the PSB acquisition.  The Series C Preferred Stock is entitled to the payment of noncumulative dividends, if and when declared by the Company’s Board of Directors, at the rate of 4.00% per annum, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, beginning on April 15, 2013.  On January 31, 2013, the Company declared a 1.00% first quarter dividend for holders of its Series C preferred stock of record on April 1, 2013, which was paid on April 15, 2013.  On May 22, 2013, the Company declared a 1.00% second quarter dividend for holders of its Series C preferred stock of record on July 1, 2013, which was paid on July 15, 2013.  On July 24, 2013, the Company declared a 1.00% third quarter dividend for holders of its Series C preferred stock of record on October 1, 2013, which was paid on October 15, 2013.

39

Dividends from the Bank totaling $8.0 million provided additional liquidity for the Company during the nine months ended September 30, 2013.  As of September 30, 2013, the Bank had the ability to pay dividends to the Company of approximately $20.4 million without prior approval from its primary regulator.  Additionally, the Bank paid no dividends to the Company for the year ended December 31, 2012.  As a publicly traded company, the Company also has the ability, subject to market conditions, to issue additional shares of common stock and other securities to provide funds as needed for operations and future growth of the Company.

Capital

The Company and the Bank are required to maintain certain minimum capital levels.  Risk-based capital requirements are intended to make regulatory capital more sensitive to the risk profile of an institution's assets.  At September 30, 2013, the Company and the Bank were in compliance with statutory minimum capital requirements and were classified as “well capitalized.”  Minimum capital requirements include a total risk-based capital ratio of 8.0%, with Tier 1 capital not less than 4.0%, and a Tier 1 leverage ratio (Tier 1 to total average adjusted assets) of 4.0% based upon the regulators latest composite rating of the institution.As of September 30, 2013, the Company’s Tier 1 leverage ratio was 9.17%, Tier 1 capital to risk-weighted assets was 13.13% and total capital to risk-weighted assets was 13.84%.  The Bank had a Tier 1 leverage capital ratio of 8.82% at September 30, 2013.  The Bank’s four acquisitions over the past eighteen months reduced capital levels; however, the Company and the Bank continue to be classified as “well capitalized.”

In July 2013, the federal bank regulatory agencies adopted rules to implement the Basel III capital framework and for calculating risk-weighted assets, as modified by the U.S. federal bank regulators.  These rules, known as “Basel III”, create a new regulatory capital standard based on Tier 1 common equity and increase the minimum leverage and risk-based capital ratios applicable to all banking organization.

The Basel III rules include new minimum risk-based and leverage ratios, and modify capital and asset definitions for purposes of calculating these ratios.  Among other things, the Basel III rules will impact regulatory capital ratios of banking organizations in the following manner, when fully phased in: create a new requirement to maintain a ratio of common equity Tier 1 capital to total risk-weighted assets of not less than 4.5%; increase the minimum leverage capital ratio to 4.0% for all banking organizations (currently 3.0% for certain banking organizations); increase the minimum Tier 1 risk-based capital ratio from 4.0% to 6.0%; and maintain the minimum total risk-based capital ratio at 8.0%.  In addition, the Basel III rules subject banking organizations to certain limitations on capital distributions and discretionary bonus payments to executive officers if the organization does not maintain a capital conservation buffer of 2.5% above the new regulatory minimum capital ratios.  The effect of the capital conservation buffer will be to increase the minimum common equity Tier 1 capital ratio to 7.0%, the minimum Tier 1 risk-based capital ratio to 8.5% and the minimum total risk-based capital ratio to 10.5%, for banking organizations seeking to avoid the limitations on capital distributions and discretionary bonus payments to executive officers.

The new minimum capital requirements are effective on January 1, 2015 for community banking organizations, such as MidSouth, whereas other requirements of the Basel III rules phase in over time.  While we believe our current capital levels would be adequate under the new rules, the ultimate impact of these rules on the Company and the Bank is unknown at this time.

Asset Quality

Credit Risk Management

We manage credit risk primarily by observing written, board approved policies that govern all credit underwriting and approval activities.  Our Chief Credit Officer (“CCO”) is responsible for credit underwriting and loan operations for the Bank.  The role of the CCO includes on-going review and development of lending policies, commercial credit analysis, centralized consumer underwriting, loan operations documentation and funding, and overall credit risk management procedures.  The current risk management process requires that each individual loan officer review his or her portfolio on a quarterly basis and assign recommended credit ratings on each loan.  These efforts are supplemented by independent reviews performed by the loan review officer and other validations performed by the internal audit department.  The results of the reviews are reported directly to the Audit Committee of the Board of Directors.  We believe the conservative nature of our underwriting practices has resulted in strong credit quality in our loan portfolio.  Completed loan applications, credit bureau reports, financial statements, and a committee approval process remain a part of credit decisions.  Documentation of the loan decision process is required on each credit application, whether approved or denied, to ensure thorough and consistent procedures.  Additionally, we have historically recognized and disclosed significant problem loans quickly and taken prompt action to address material weaknesses in those credits.

40

Credit concentrations are monitored and reported quarterly whereby individual customer and aggregate industry leverage, profitability, risk rating distributions, and liquidity are evaluated for each major standard industry classification segment.  At September 30, 2013, one industry segment concentration, the oil and gas industry, aggregated more than 10% of our loan portfolio.  Our exposure in the oil and gas industry, including related service and manufacturing industries, totaled approximately $189.8 million, or 16.6% of total loans.  Additionally, we monitor our exposure to loans secured by commercial real estate.  At September 30, 2013, loans secured by commercial real estate (including commercial construction, farmland and multifamily loans) totaled approximately $458.9 million, with $2.5 million, or 0.5% on nonaccrual status.  Of the $458.9 million, $349.2 million represent CRE loans, 61.2% of which are secured by owner-occupied commercial properties.  Additional information regarding credit quality by loan classification is provided in Note 4 – Credit Quality of Loans and Allowance for Loan Losses and Note 9 – Fair Value Measurement in the notes to the interim consolidated financial statements.

41

Nonperforming Assets and Allowance for Loan Loss

Table 6 summarizes the Company's nonperforming assets for the quarters ending September 30, 2013 and 2012, and December 31, 2012.

Table 6
Nonperforming Assets and Loans Past Due 90 Days or More and Still Accruing
(in thousands)
	September 30, 2013 (1)			December 31, 2013 (1)			September 30, 2012
Nonaccrual loans	$	5,760		$	8,276		$	8,307
Loans past due 90 days and over and still accruing		744			1,986			532
Total nonperforming loans		6,504			10,262			8,839
Other real estate		6,672			7,496			6,608
Other foreclosed assets		18			151			51
Total nonperforming assets	$	13,194		$	17,909		$	15,498
Troubled debt restructurings	$	533		$	5,062		$	242
Nonperforming assets to total assets		0.71	%		0.97	%		1.08	%
Nonperforming assets to total loans + ORE + other foreclosed assets		1.15	%		1.70	%		1.90	%
ALL to nonperforming loans		133.26	%		71.82	%		83.43	%
ALL to total loans		0.76	%		0.70	%		0.91	%
QTD charge-offs	$	375		$	557		$	234
QTD recoveries		61			53			86
QTD net charge-offs	$	314		$	504		$	148
Annualized net charge-offs to total loans		0.11	%		0.19	%		0.07	%

⁽¹⁾ Balances have been adjusted from previously reported amounts for discounts associated with purchase credit impaired loans.

Nonperforming assets totaled $13.2 million at September 30, 2013, a decrease of $4.7 million from the $17.9 million reported at year-end 2012 and a decrease of $2.3 million from the $15.5 million reported at September 30, 2012.  The decrease in the first nine months of 2013 resulted from a $4.0 million reduction in nonperforming loans, including loans past due 90 days and over.  Allowance coverage for nonperforming loans was 133.26% at September 30, 2013 compared to 71.82% at December 31, 2012 and 83.43% at September 30, 2012 due to a $2.3 million charge to the provision for loan losses during the first nine months of 2013.  The ALL/total loans ratio increased slightly to 0.76% compared to 0.70% at year-end 2012, down from the 0.91% at September 30, 2012.  The ALL/total loans ratio decreased primarily due to the loans acquired from PSB.   Including valuation accounting adjustments on acquired loans, the total adjustments and ALL was 1.61% of loans at September 30, 2013.  The ratio of annualized net charge-offs to total loans was 0.11% for the three months ended September 30, 2013, compared to 0.19% for the three months ended December 31, 2012, and up slightly from the 0.07% for the three months ended September 30, 2012.

Total nonperforming assets to total loans plus ORE and other assets repossessed decreased to 1.15% at September 30, 2013 from 1.70% at December 31, 2012 and from 1.90% at September 30, 2012.  Loans classified as troubled debt restructurings (“TDRs”) totaled $533,000 at September 30, 2013 compared to $5.1 million at December 31, 2012 and $242,000 at September 30, 2012.  A total of $4.8 million in TDRs were acquired with PSB and included four credits, two of which are large commercial credits.  The $4.5 million decrease from year-end 2012 resulted primarily from payoffs related to two commercial credits previously classified as TDRs that were acquired with PSB.  Classified assets, including ORE, increased slightly during the nine months ended September 30, 2013, from $34.4 million at December 31, 2012 to $34.5 million.  Additional information regarding impaired loans is included in Note 4 – Credit Quality of Loans and Allowance for Loan Losses and Note 9 – Fair Value Measurement in the notes to the interim consolidated financial statements.

Quarterly evaluations of the allowance for loan losses are performed in accordance with GAAP and regulatory guidelines.  The ALL is comprised of specific reserves assigned to each impaired loan for which a probable loss has been identified as well as general reserves to maintain the allowance at an acceptable level for other loans in the portfolio where historical loss experience is available that indicates certain probable losses may exist.  Factors considered in determining provisions include estimated losses in significant credits; known deterioration in concentrations of credit; historical loss experience; trends in nonperforming assets; volume, maturity and composition of the loan portfolio; off-balance sheet credit risk; lending policies and control systems; national and local economic conditions; the experience, ability and depth of lending management; and the results of examinations of the loan portfolio by regulatory agencies and others.  The processes by which we determine the appropriate level of the ALL, and the corresponding provision for probable credit losses, involves considerable judgment; therefore, no assurance can be given that future losses will not vary from current estimates. We believe the $8.7 million in the ALL as of September 30, 2013 is sufficient to cover probable losses in the loan portfolio.

42

Impact of Inflation and Changing Prices

The consolidated financial statements and notes thereto, presented herein, have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company’s operations.  Unlike most industrial companies, nearly all the assets and liabilities of the Company are financial.  As a result, interest rates have a greater impact on the Company’s performance than do the effects of general levels of inflation.  Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes from the information regarding market risk disclosed under the heading “Funding Sources - Interest Rate Sensitivity” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Item 4. Controls and Procedures.

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  As of the end of the period covered by this Quarterly Report on Form 10-Q, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it submits under the Exchange

Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

During the third quarter of 2013, there was no change in the Company’s internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

43

Part II – Other Information

Item 1. Legal Proceedings.

The Bank has been named as a defendant in various legal actions arising from normal business activities in which damages of various amounts are claimed.  While the amount, if any, of ultimate liability with respect to such matters cannot be currently determined, management believes, after consulting with legal counsel, that any such liability will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.  However, in the event of unexpected future developments in these matters, if the ultimate resolution of any such matter is unfavorable, the result may be material to the Company’s consolidated financial position, consolidated results of operations or consolidated cash flows.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The Company did not sell any unregistered equity securities or repurchase any equity securities during the quarter ended September 30, 2013.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit NumberDocument Description

3.1 Amended and Restated Articles of Incorporation of MidSouth Bancorp, Inc. (restated solely for purposes of Item 601(b)(3) of Regulation S-K) (filed as Exhibit 3.1 to MidSouth's Annual Report on Form 10-K filed on March 15, 2013 and incorporated herein by reference).

3.2 Amended and Restated By-laws of MidSouth Bancorp, Inc. effective as of September 12, 2012 (restated solely for purposes of Item 601(b)(3) of Regulation S-K (filed as Exhibit 3.3 to MidSouth’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 and incorporated herein by reference).

31.1 Certification pursuant to Exchange Act Rules 13(a) – 14(a)

31.2 Certification pursuant to Exchange Act Rules 13(a) – 14(a)

32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, formatted in Extensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements.*

*  Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not to be “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under these sections.

44

Signatures

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MidSouth Bancorp, Inc. (Registrant)
Date: November 8, 2013
	/s/ C. R. Cloutier
	C. R. Cloutier, President /CEO
	(Principal Executive Officer)
	/s/ James R. McLemore
	James R. McLemore, CFO
	(Principal Financial Officer)
	/s/ Teri S. Stelly
	Teri S. Stelly, Controller (Principal Accounting Officer)

45

EX-31.1

Exhibit 31.1

CERTIFICATION

I, C. R. Cloutier, President and CEO, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of MidSouth Bancorp, Inc.;

2.  Based on my knowledge, this quarterly 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 quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 and 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 quarterly report is being prepared;

b) designed such internal control over financial reporting, or cause 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 quarterly report based on such evaluations; 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 weaknesses 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: November 8, 2013

/s/ C. R. Cloutier

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, James R. McLemore, Senior Executive Vice President & CFO, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of MidSouth Bancorp, Inc.;

2.  Based on my knowledge, this quarterly 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 quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 and 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 quarterly report is being prepared;

b) designed such internal control over financial reporting, or cause 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 quarterly report (the "Evaluation Date"); 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 weaknesses 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 data; 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: November 8, 2013

/s/ James R. McLemore

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MidSouth Bancorp, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2013 (the “Report”), I, C.R. Cloutier, Chief Executive Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) 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.

/s/ C. R. Cloutier

C.R. Cloutier

Chief Executive Officer

November 8, 2013

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MidSouth Bancorp, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2013 (the “Report”), I, James R. McLemore, Chief Financial Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) 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.

/s/ James R. McLemore

James R. McLemore

Chief Financial Officer

November 8, 2013

XML

Fair Value Measurement

9 Months Ended

Sep. 30, 2013

Fair Value Measurement [Abstract]

Fair Value Measurement

9.Fair Value Measurement

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market.  These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities which are either recorded or disclosed at fair value.

Cash and Cash Equivalents—The carrying value of cash and cash equivalents is a reasonable estimate of fair value.

Time Deposits Held in Banks—Fair values for fixed-rate time deposits are estimated using a discounted cash flow analysis that applies interest rates currently being offered on time deposits of similar terms of maturity.

Securities Available-for-Sale—Securities available-for-sale are recorded at fair value on a recurring basis.  Fair value measurement is based upon quoted prices, if available.  If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.  Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds.  Securities are classified as Level 2 within the valuation hierarchy when the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond’s terms and conditions, among other things. Level 2 inputs are used to value U.S. Agency securities, mortgage-backed securities, asset-backed securities, municipal securities, single issue trust preferred securities, certain pooled trust preferred securities, collateralized debt obligations and certain equity securities that are not actively traded.

Securities Held-to-Maturity—The fair value of securities held-to-maturity is estimated using the same measurement techniques as securities available-for-sale.

Other Investments—The carrying value of other investments is a reasonable estimate of fair value.

Loans—For disclosure purposes, the fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings.  For variable rate loans, the carrying amount is a reasonable estimate of fair value.  The Company does not record loans at fair value on a recurring basis.  No adjustment to fair value is taken related to illiquidity discounts.  However, from time to time, a loan is considered impaired and an allowance for loan losses is established.  Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.  Once a loan is identified as individually impaired, management uses one of three methods to measure impairment, which, include collateral value, market value of similar debt, and discounted cash flows.  Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.  Impaired loans where an allowance is established based on the fair value of collateral or where the loan balance has been charged down to fair value require classification in the fair value hierarchy.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and adjusts the appraisal value by taking an additional discount for market conditions and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.

For non-performing loans, collateral valuations currently in file are reviewed for acceptability in terms of timeliness and applicability.  Although each determination is made based on the facts and circumstances of each credit, generally valuations are no longer considered acceptable when there has been physical deterioration of the property from when it was last appraised, or there has been a significant change in the underlying assumptions of the appraisal.  If the valuation is deemed to be unacceptable, a new appraisal is ordered.  New appraisals are typically received within 4-6 weeks.  While awaiting new appraisals, the valuation in the file is utilized, net of discounts.  Discounts are derived from available relevant market data, selling costs, taxes, and insurance.  Any perceived collateral deficiency utilizing the discounted value is specifically reserved (as required by ASC Topic 310) until the new appraisal is received or charged off.  Thus, provisions or charge-offs are recognized in the period the credit is identified as non-performing.

The following sources are utilized to set appropriate discounts: in-market real estate agents, current local sales data, bank history for devaluation of similar property, Sheriff’s valuations and buy/sell contracts.  If a real estate agent is used to market and sell the property, values are discounted 10% for selling costs.  Additional discounts may be applied if research from the above sources indicates a discount is appropriate given devaluation of similar property from the time of the initial valuation.

Other Real Estate—Other real estate (“ORE”) properties are adjusted to fair value upon transfer of the loans to other real estate, and annually thereafter to insure other real estate assets are carried at the lower of carrying value or fair value.  Exceptions to obtaining initial appraisals are properties where a buy/sell agreement exists for the loan value or greater, or where a Sheriff’s valuation has been received for properties liquidated through a Sheriff sale.  Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the ORE as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and adjusts the appraisal value by taking an additional discount for market conditions and there is no observable market prices, the Company records the ORE asset as nonrecurring Level 3.

Cash Surrender Value of Life Insurance Policies—Fair value for life insurance cash surrender value is based on cash surrender values indicated by the insurance companies.

Deposits—The fair value of demand deposits, savings accounts, NOW accounts, and money market deposits is the amount payable on demand at the reporting date.  The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.  The estimated fair value does not include customer related intangibles.

Securities Sold Under Agreements to Repurchase—The fair value approximates the carrying value of securities sold under agreements to repurchase due to their short-term nature.

Notes payable—The fair value approximates the carrying value of short-term notes payable due to their short-term nature.  The fair value of long-term notes payable is estimated using a discounted cash flow analysis that applies interest rates currently being offered on similar types of borrowings with similar terms.

Junior Subordinated Debentures—For junior subordinated debentures that bear interest on a floating basis, the carrying amount approximates fair value.  For junior subordinated debentures that bear interest on a fixed rate basis, the fair value is estimated using a discounted cash flow analysis that applies interest rates currently being offered on similar types of borrowings.

Commitments to Extend Credit, Standby Letters of Credit and Credit Card Guarantees—Because commitments to extend credit and standby letters of credit are generally short-term and made using variable rates, the carrying value and estimated fair value associated with these instruments are immaterial.

Assets Recorded at Fair Value

The table below presents information about certain assets and liabilities measured at fair value on a recurring basis (in thousands):

			Fair Value Measurements at September 30, 2013 using:
Description	Assets / Liabilities Measured at Fair Value  at September 30, 2013		Level 1		Level 2		Level 3
Available-for-sale securities:
U.S. Government sponsored enterprises	$	11,419	$	-	$	11,419	$	-
Obligations of state and political subdivisions		66,524		-		66,524		-
GSE mortgage-backed securities		152,574		-		152,574		-
Other asset-backed securities		25,722		-		25,722		-
Collateralized mortgage obligations: residential		74,315		-		74,315		-
Collateralized mortgage obligations: commercial		27,530		-		27,530		-
Collateralized debt obligations		591		-		591		-
	$	358,675	$	-	$	358,675	$	-

			Fair Value Measurements at December 31, 2012 using:
Description	Assets / Liabilities Measured at Fair Value  at December 31, 2012		Level 1		Level 2		Level 3
Available-for-sale securities:
U.S. Government sponsored enterprises	$	13,424	$	-	$	13,424	$	-
Obligations of state and political subdivisions		87,421		-		87,421		-
GSE mortgage-backed securities		178,819		-		178,819		-
Collateralized mortgage obligations: residential		101,986		-		101,986		-
Collateralized mortgage obligations: commercial		29,761		-		29,761		-
Other asset-backed securities		12,742		-		12,742		-
Collateralized debt obligations		464		-		464		-
	$	424,617	$	-	$	424,617	$	-

Certain assets and liabilities are measured at fair value on a nonrecurring basis and are included in the table below (in thousands).  Impaired loans are Level 2 assets measured using appraisals from external parties of the collateral less any prior liens.  Other real estate properties are also Level 2 assets measured using appraisals from external parties.  Acquired loans are Level 3 assets measured on a nonrecurring basis.

			Fair Value Measurements Using
	September 30, 2013		Level 1		Level 2		Level 3
Assets
Acquired loans with deteriorated credit quality	$	1,016	$	-	$	-	$	1,016
Other real estate		6,672		-		6,672		-
Impaired loans, excluding acquired loans		2,152		-		2,152		-
Total	$	9,840	$	-	$	8,824	$	1,016

			Fair Value Measurements Using
	December 31, 2012		Level 1		Level 2		Level 3
Assets
Acquired loans with deteriorated credit quality	$	4,521	$	-	$	-	$	4,521
Other real estate		7,496		-		7,496		-
Impaired loans, excluding acquired loans		2,245		-		2,245		-
Total	$	14,262	$	-	$	9,741	$	4,521

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

The carrying amounts and estimated fair values of the Company’s financial instruments are as follows at September 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements at September 30, 2013 Using:
	Carrying  Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	43,434	$	43,434	$	-	$	-
Securities available-for-sale		358,675		-		358,675		-
Securities held-to-maturity		159,141		-		156,117		-
Other investments		10,951		10,951		-		-
Loans, net		1,136,356		-		-		1,145,675
Cash surrender value of life insurance policies		13,392		-		13,392		-
Financial liabilities:
Non-interest-bearing deposits		380,048		-		380,048		-
Interest-bearing deposits		1,126,078		-		878,091		249,227
Securities sold under agreements to repurchase		73,909		73,909		-		-
Notes payable		53,059		-		25,000		29,212
Junior subordinated debentures		29,384		-		22,167		7,590

			Fair Value Measurements at December 31, 2012 Using:
	Carrying Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	73,573	$	73,573	$	-	$	-
Time deposits held in banks		881		-		-		883
Securities available-for-sale		424,617		-		424,617		-
Securities held-to-maturity		153,524		-		156,924		-
Other investments		8,310		8,310		-		-
Loans, net		1,039,570		-		-		1,046,495
Cash surrender value of life insurance policies		13,183		-		13,183		-
Financial liabilities:
Non-interest-bearing deposits		380,557		-		380,557		-
Interest-bearing deposits		1,171,347		-		859,183		314,783
Securities sold under agreements to repurchase		41,447		41,447		-		-
Notes payable		29,128		-		-		29,128
Junior subordinated debentures		29,384		-		22,167		7,776

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Consolidated Statements of Earnings (unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Interest income:
Loans, including fees	$ 17,652	$ 12,540	$ 52,966	$ 37,298
Securities and other investments:
Taxable	2,171	2,048	6,481	6,265
Nontaxable	785	697	2,436	2,202
Federal funds sold	1	2	6	6
Time and interest bearing deposits in other banks	15	13	70	73
Other investments	80	55	230	142
Total interest income	20,704	15,355	62,189	45,986
Interest expense:
Deposits	976	1,030	3,044	3,189
Federal funds purchased	0	0	3	0
Securities sold under agreements to repurchase	204	197	565	564
Other borrowings and payable	118	0	345	0
Junior subordinated debentures	335	241	1,007	733
Total interest expense	1,633	1,468	4,964	4,486
Net interest income	19,071	13,887	57,225	41,500
Provision for loan losses	450	300	2,250	1,550
Net interest income after provision for loan losses	18,621	13,587	54,975	39,950
Non-interest income:
Service charges on deposit accounts	2,352	1,898	6,794	5,590
Gain on securities, net	25	69	229	204
ATM and debit card income	1,719	1,123	4,713	3,398
Other charges and fees	892	664	2,687	2,055
Total non-interest income	4,988	3,754	14,423	11,247
Non-interest expenses:
Salaries and employee benefits	8,640	6,273	25,401	18,511
Occupancy expense	3,874	2,952	11,196	8,283
FDIC insurance	265	242	854	695
Other	5,702	4,163	16,728	12,599
Total non-interest expenses	18,481	13,630	54,179	40,088
Income before income taxes	5,128	3,711	15,219	11,109
Income tax expense	1,588	1,062	4,588	3,096
Net earnings	3,540	2,649	10,631	8,013
Dividends on preferred stock	468	400	1,152	1,180
Net earnings available to common shareholders	$ 3,072	$ 2,249	$ 9,479	$ 6,833
Earnings per share:
Basic (in dollars per share)	$ 0.27	$ 0.21	$ 0.84	$ 0.65
Diluted (in dollars per share)	$ 0.27	$ 0.21	$ 0.83	$ 0.65

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Investment Securities

9 Months Ended

Sep. 30, 2013

Investment Securities [Abstract]

Investment Securities

2.  Investment Securities

The portfolio of investment securities consisted of the following (in thousands):

	September 30, 2013
	Amortized  Cost		Gross Unrealized  Gains		Gross Unrealized  Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	11,605	$	3	$	189	$	11,419
Obligations of state and political subdivisions		64,124		2,586		186		66,524
GSE mortgage-backed securities		151,517		2,833		1,776		152,574
Other asset-backed securities		25,424		371		73		25,722
Collateralized mortgage obligations: residential		76,244		313		2,242		74,315
Collateralized mortgage obligations: commercial		27,177		441		88		27,530
Collateralized debt obligation		464		127		-		591
	$	356,555	$	6,674	$	4,554	$	358,675

	December 31, 2012
	Amortized  Cost		Gross  Unrealized  Gains		Gross Unrealized  Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	13,422	$	2	$	-	$	13,424
Obligations of state and political subdivisions		83,093		4,328		-		87,421
GSE mortgage-backed securities		172,932		5,887		-		178,819
Collateralized mortgage obligations: residential		101,381		652		47		101,986
Collateralized mortgage obligations: commercial		28,528		1,233		-		29,761
Other asset-backed securities		12,245		497		-		12,742
Collateralized debt obligation		464		-		-		464
	$	412,065	$	12,599	$	47	$	424,617

	September 30, 2013
	Amortized  Cost		Gross Unrealized  Gains		Gross  Unrealized  Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	47,574	$	55	$	2,441	$	45,188
GSE mortgage-backed securities		81,081		798		746		81,133
Collateralized mortgage obligations: residential		14,493		-		819		13,674
Collateralized mortgage obligations: commercial		15,993		129		-		16,122
	$	159,141	$	982	$	4,006	$	156,117

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross  Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	42,900	$	7	$	7	$	42,900
GSE mortgage-backed securities		89,383		2,819		-		92,202
Collateralized mortgage obligations: residential		5,009		-		-		5,009
Collateralized mortgage obligations: commercial		16,232		581		-		16,813
	$	153,524	$	3,407	$	7	$	156,924

With the exception of 3 private-label collateralized mortgage obligations (“CMOs”) with a combined balance remaining of $67,000 at September 30, 2013, all of the Company’s CMOs are government-sponsored enterprise (“GSE”) securities.

The amortized cost and fair value of debt securities at September 30, 2013 by contractual maturity are shown in the following table (in thousands) with the exception of other asset-backed securities, mortgage-backed securities, CMOs, and the collateralized debt obligation.   Expected maturities may differ from contractual maturities for mortgage-backed securities and CMOs because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
Available-for-sale:
Due in one year or less	$	11,031	$	11,150
Due after one year through five years		39,560		40,758
Due after five years through ten years		19,437		20,491
Due after ten years		5,701		5,544
Other asset-backed securities		25,424		25,722
Mortgage-backed securities and collateralized mortgage obligations:
Residential		227,761		226,889
Commercial		27,177		27,530
Collateralized debt obligation		464		591
	$	356,555	$	358,675

	Amortized  Cost		Fair Value
Held-to-maturity:
Due in one year or less	$	101	$	101
Due after one year through five years		2,204		2,187
Due after five years through ten years		6,983		6,823
Due after ten years		38,286		36,077
Mortgage-backed securities and collateralized mortgage obligations:
Residential		95,574		94,807
Commercial		15,993		16,122
	$	159,141	$	156,117

Details concerning investment securities with unrealized losses are as follows (in thousands):

	September 30, 2013
	Securities with losses  under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross  Unrealized Loss		Fair  Value		Gross  Unrealized  Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
U.S. Government sponsored enterprises	$	10,544	$	189	$	-	$	-	$	10,544	$	189
Obligations of state and political subdivisions		3,616		186		-		-		3,616		186
GSE mortgage-backed  securities		74,925		1,776		-		-		74,925		1,776
Other asset-backed securities		13,275		73		-		-		13,275		73
Collateralized mortgage  obligations:
residential		49,749		2,241		66		1		49,815		2,242
Collateralized mortgage  obligations:
commercial		4,385		88		-		-		4,385		88
	$	156,494	$	4,553	$	66	$	1	$	156,560	$	4,554

	December 31, 2012
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized  Loss		Fair Value		Gross  Unrealized  Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
Collateralized mortgage obligations:
residential	$	10,085	$	45	$	96	$	2	$	10,181	$	47

	September 30, 2013
	Securities with losses under 12 months				Securities with losses  over 12 months				Total
	Fair Value		Gross  Unrealized  Loss		Fair Value		Gross Unrealized  Loss		Fair  Value		Gross Unrealized  Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	42,768	$	2,441	$	-	$	-	$	42,768	$	2,441
GSE mortgage-backed securities		32,373		746		-		-		32,373		746
Collateralized mortgage obligations:
residential		13,674		819		-		-		13,674		819
	$	88,815	$	4,006	$	-	$	-	$	88,815	$	4,006

	December 31, 2012
	Securities with losses  under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross  Unrealized Loss		Fair Value		Gross Unrealized  Loss		Fair  Value		Gross Unrealized  Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	1,128	$	7	$	-	$	-	$	1,128	$	7

Management evaluates each quarter whether unrealized losses on securities represent impairment that is other than temporary. For debt securities, the Company considers its intent to sell the securities or if it is more likely than not the Company will be required to sell the securities.  If such impairment is identified, based upon the intent to sell or the more likely than not threshold, the carrying amount of the security is reduced to fair value with a charge to earnings. Upon the result of the aforementioned review, management then reviews for potential other than temporary impairment based upon other qualitative factors.  In making this evaluation, management considers changes in market rates relative to those available when the security was acquired, changes in market expectations about the timing of cash flows from securities that can be prepaid, performance of the debt security, and changes in the market’s perception of the issuer’s financial health and the security’s credit quality.  If determined that a debt security has incurred other than temporary impairment, then the amount of the credit related impairment is determined.  If a credit loss is evident, the amount of the credit loss is charged to earnings and the non-credit related impairment is recognized through other comprehensive income.

As of September 30, 2013, 107 securities had unrealized losses totaling 3.37% of the individual securities’ amortized cost basis and 1.66% of the Company’s total amortized cost basis.  Two of the 107 securities had been in an unrealized loss position for over twelve months at September 30, 2013.  These two securities had an amortized cost basis and unrealized loss of $66,000 and $1,000, respectively.  The unrealized losses on debt securities at September 30, 2013 resulted from changing market interest rates over the yields available at the time the underlying securities were purchased.  Management identified no impairment related to credit quality.  At September 30, 2013, management had the intent and ability to hold impaired securities and no impairment was evaluated as other than temporary.  As a result, no other than temporary impairment losses were recognized during the nine months ended September 30, 2013.

During the nine months ended September 30, 2013, the Company sold 33 securities classified as available-for-sale at a net gain of $229,000.  Of the 33 securities sold, 29 securities were sold with gains totaling $242,000 and four securities were sold at a loss of $13,000.  During the nine months ended September 30, 2012, the Company sold six securities classified as available-for-sale at a gain of $204,000.

Securities with an aggregate carrying value of approximately $287.1 million and $226.2 million at September 30, 2013 and December 31, 2012, respectively, were pledged to secure public funds on deposit and for other purposes required or permitted by law.

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Goodwill and Intangibles (Tables)

9 Months Ended

Sep. 30, 2013

Goodwill and Intangibles [Abstract]

Changes to carrying amount of goodwill

Changes to the carrying amount of goodwill for the nine months ended September 30, 2013 are provided in the following table (in thousands):

Balance, December 31, 2012	$	42,781
1st quarter 2013 adjustment to goodwill		(105	)
2nd quarter 2013 adjustment to goodwill		(190	)
Balance, September 30, 2013	$	42,486

Summary of core deposit intangible assets

A summary of core deposit intangible assets as of September 30, 2013 and December 31, 2012 is as follows (in thousands):

	September 30, 2013			December 31, 2012
Gross carrying amount	$	11,674		$	11,674
Less accumulated amortization		(3,457	)		(2,627	)
Net carrying amount	$	8,217		$	9,047

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Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2013

Basis of Presentation [Abstract]

Use of Estimates

Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies — The accounting and reporting policies of the Company conform with GAAP and general practices within the banking industry.  There have been no material changes or developments in the application of accounting principles or in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies and Estimates as disclosed in our 2012 Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements — ASU 2013-01, Balance Sheet (Topic 210):  Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities applies to derivatives accounted for in accordance with ASC 815 (Derivatives and Hedging), including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities lending transactions that are either offset in accordance with ASC 210-20-45 or ASC 815-10-45 or subject to an enforceable master netting arrangement or similar agreement.  The effective date of this Update is for fiscal years beginning on or after January 1, 2013 and interim periods within those annual periods.  Adoption of this Update did not impact the Company’s consolidated financial statements or the interim notes to the consolidated financial statements.

ASU 2013-02, Comprehensive Income (Topic 220):  Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income was issued in the first quarter of 2013 to improve the reporting of reclassifications out of accumulated other comprehensive income (“AOCI”).  The ASU requires information regarding the impact to net earnings of the reclassification on significant amounts out of AOCI to be presented on either the face of the statement of earnings or in the notes to the financial statements.  The amendments in this Update do not change the current reporting requirements for net earnings or AOCI.  For public entities, the amendments in this Update are effective prospectively for reporting periods beginning after December 15, 2012.  In compliance with the Update, the information required has been included in the Consolidated Statements of Comprehensive Income and Note 5 in these unaudited consolidated financial statements.

Reclassifications

Reclassifications — Certain reclassifications have been made to the prior years’ financial statements in order to conform to the classifications adopted for reporting in 2013.  The reclassifications had no impact on net earnings or shareholders equity.

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Fair Value Measurement (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount for selling costs (in hundredths)	10.00%
Available-for-sale securities [Abstract]
Available-for-sale securities	$ 358,675	$ 424,617	[1]
Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Period when new appraisals are received (in weeks)	4
Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Period when new appraisals are received (in weeks)	6
Fair Value, Measurements, Recurring [Member]
Available-for-sale securities [Abstract]
U.S. Government sponsored enterprises	11,419	13,424
Obligations of state and political subdivisions	66,524	87,421
GSE mortgage-backed securities	152,574	178,819
Other asset-backed securities	25,722
Collateralized mortgage obligations: residential	74,315	101,986
Collateralized mortgage obligations: commercial	27,530	29,761
Other asset-backed securities		12,742
Collateralized debt obligation	591	464
Available-for-sale securities	358,675	424,617
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Available-for-sale securities [Abstract]
U.S. Government sponsored enterprises	0	0
Obligations of state and political subdivisions	0	0
GSE mortgage-backed securities	0	0
Other asset-backed securities	0
Collateralized mortgage obligations: residential	0	0
Collateralized mortgage obligations: commercial	0	0
Other asset-backed securities		0
Collateralized debt obligation	0	0
Available-for-sale securities	0	0
Fair Value, Measurements, Recurring [Member] | Level 2 [Member]
Available-for-sale securities [Abstract]
U.S. Government sponsored enterprises	11,419	13,424
Obligations of state and political subdivisions	66,524	87,421
GSE mortgage-backed securities	152,574	178,819
Other asset-backed securities	25,722
Collateralized mortgage obligations: residential	74,315	101,986
Collateralized mortgage obligations: commercial	27,530	29,761
Other asset-backed securities		12,742
Collateralized debt obligation	591	464
Available-for-sale securities	358,675	424,617
Fair Value, Measurements, Recurring [Member] | Level 3 [Member]
Available-for-sale securities [Abstract]
U.S. Government sponsored enterprises	0	0
Obligations of state and political subdivisions	0	0
GSE mortgage-backed securities	0	0
Other asset-backed securities	0
Collateralized mortgage obligations: residential	0	0
Collateralized mortgage obligations: commercial	0	0
Other asset-backed securities		0
Collateralized debt obligation	0	0
Available-for-sale securities	0	0
Fair Value, Measurements, Nonrecurring [Member]
Assets and Liabilities Measured on Nonrecurring Basis
Acquired loans with deteriorated credit quality	1,016	4,521
Other real estate	6,672	7,496
Impaired loans, excluding acquired loans	2,152	2,245
Total	9,840	14,262
Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member]
Assets and Liabilities Measured on Nonrecurring Basis
Acquired loans with deteriorated credit quality	0	0
Other real estate	0	0
Impaired loans, excluding acquired loans	0
Total	0	0
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member]
Assets and Liabilities Measured on Nonrecurring Basis
Acquired loans with deteriorated credit quality	0	0
Other real estate	6,672	7,496
Impaired loans, excluding acquired loans	2,152	2,245
Total	8,824	9,741
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member]
Assets and Liabilities Measured on Nonrecurring Basis
Acquired loans with deteriorated credit quality	1,016	4,521
Other real estate	0	0
Impaired loans, excluding acquired loans	0	0
Total	$ 1,016	$ 4,521

[1] Derived from audited financial statements.

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Other Investments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013 Security	Dec. 31, 2012
Other Investments [Abstract]
Number of correspondent banks with stock ownership by Company	2
Number of government-sponsored agency mortgage-backed securities purchased by Company for CRA investment	3
Components of Other Investments [Abstract]
FRB - Atlanta	$ 3,789	$ 2,258
FHLB - Dallas	2,804	1,862
Other bank stocks	2,063	2,063
Other stocks	187	7
CRA investment	2,108	2,120
Total other investments	$ 10,951	$ 8,310	[1]

[1] Derived from audited financial statements.

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Investment Securities (Details) (USD $)	9 Months Ended
	Sep. 30, 2013 Security Label	Sep. 30, 2012 Security	Dec. 31, 2012
Available-for-sale Securities [Abstract]
Amortized Cost	$ 356,555,000		$ 412,065,000
Gross Unrealized Gains	6,674,000		12,599,000
Gross Unrealized Losses	4,554,000		47,000
Fair Value	358,675,000		424,617,000
Held-to-maturity [Abstract]
Amortized Cost	159,141,000		153,524,000	[1]
Gross Unrealized Gains	982,000		3,407,000
Gross Unrealized Losses	4,006,000		7,000
Fair Value	156,117,000		156,924,000
Number of Private label Collateralized Mortgage Obligations	3
Combined balance of private-label collateralized mortgage obligations	67,000
Available-for-sale, Amortized Cost [Abstract]
Due in one year or less	11,031,000
Due after one year through five years	39,560,000
Due after five years through ten years	19,437,000
Due after ten years	5,701,000
Other asset-backed securities	25,424,000
Mortgage-backed securities and collateralized mortgage obligations: Residential, Amortized Cost	227,761,000
Mortgage-backed securities and collateralized mortgage obligations: Commercial, Amortized Cost	27,177,000
Collateralized debt obligation	464,000
Available-for-sale securities, Amortized Cost	356,555,000
Available-for-sale, Fair Value [Abstract]
Due in one year or less	11,150,000
Due after one year through five years	40,758,000
Due after five years through ten years	20,491,000
Due after ten years	5,544,000
Other asset-backed securities	25,722,000
Mortgage-backed securities and collateralized mortgage obligations: Residential, Fair Value	226,889,000
Mortgage-backed securities and collateralized mortgage obligations: Commercial, Fair Value	27,530,000
Collateralized debt obligation, at fair Value	591,000
Available-for-sale securities, Fair Value	358,675,000
Held-to-maturity, Amortized Cost [Abstract]
Due in one year or less	101,000
Due after one year through five years	2,204,000
Due after five years through ten years	6,983,000
Due after ten years	38,286,000
Mortgage-backed securities and collateralized mortgage obligations: Residential, Amortized Cost	95,574,000
Mortgage-backed securities and collateralized mortgage obligations: Commercial, Amortized Cost	15,993,000
Held-to-maturity securities, Amortized Cost	159,141,000
Held-to-maturity, Fair Value [Abstract]
Due in one year or less	101,000
Due after one year through five years	2,187,000
Due after five years through ten years	6,823,000
Due after ten years	36,077,000
Mortgage-backed securities and collateralized mortgage obligations: Residential, Fair Value	94,807,000
Mortgage-backed securities and collateralized mortgage obligations: Commercial, Fair Value	16,122,000
Held-to-maturity securities, Fair Value	156,117,000
Available-for-sale [Abstract]
Securities with losses under 12 months, Fair Value, Available-for-sale	156,494,000
Securities with losses under 12 months, Gross Unrealized Loss, Available-for-sale	4,553,000
Securities with losses over 12 months, Fair Value, Available-for-sale	66,000
Securities with losses over 12 months, Gross Unrealized Loss, Available-for-sale	1,000
Total, Fair Value, Available-for-sale	156,560,000
Total, Gross Unrealized Loss, Available-for-sale	4,554,000
Held-to-maturity [Abstract]
Securities with losses under 12 months, Fair Value, Held-to-maturity	88,815,000
Securities with losses under 12 months, Gross Unrealized Loss, Held-to-maturity	4,006,000
Securities with losses over 12 months, Fair Value, Held-to-maturity	0
Securities with losses over 12 months, Gross Unrealized Loss, Held-to-maturity	0
Total securities, Fair Value, Held-to-maturity	88,815,000
Total securities, Gross Unrealized Loss, Held-to-maturity	4,006,000
Number of available-for-sale and held-to-maturity securities in unrealized loss positions	107
Unrealized losses as a percentage of individual securities' amortized cost basis (in hundredths)	3.37%
Unrealized losses as a percentage of the Company's total amortized cost basis (in hundredths)	1.66%
Number of available-for-sale securities in continuous loss position	2
Unamortized cost basis of securities in a continuous loss position	66,000
Unrealized loss on securities in a continuous loss position	1,000
Number of impairment related to credit quality	0
Number of impaired securities evaluated as other temporary	0
Impairment losses were recognized on debt securities	0
Number of available-for-sale securities sold	33	6
Available-for-sale securities, net gain	229,000	204,000
Number of available-for-sale securities sold with gains	29
Available-for-sale securities, gross realized gains	242,000
Number of available-for-sale securities sold with loss	4
Available-for-sale securities, gross realized losses	13,000
Securities pledged to secure public funds on deposits and for other purposes required or permitted by law	287,100,000		226,200,000
U.S. Government Sponsored Enterprises [Member]
Available-for-sale Securities [Abstract]
Amortized Cost	11,605,000		13,422,000
Gross Unrealized Gains	3,000		2,000
Gross Unrealized Losses	189,000		0
Fair Value	11,419,000		13,424,000
Available-for-sale [Abstract]
Securities with losses under 12 months, Fair Value, Available-for-sale	10,544,000
Securities with losses under 12 months, Gross Unrealized Loss, Available-for-sale	189,000
Securities with losses over 12 months, Fair Value, Available-for-sale	0
Securities with losses over 12 months, Gross Unrealized Loss, Available-for-sale	0
Total, Fair Value, Available-for-sale	10,544,000
Total, Gross Unrealized Loss, Available-for-sale	189,000
Obligation of State and Political Subdivisions [Member]
Available-for-sale Securities [Abstract]
Amortized Cost	64,124,000		83,093,000
Gross Unrealized Gains	2,586,000		4,328,000
Gross Unrealized Losses	186,000		0
Fair Value	66,524,000		87,421,000
Held-to-maturity [Abstract]
Amortized Cost	47,574,000		42,900,000
Gross Unrealized Gains	55,000		7,000
Gross Unrealized Losses	2,441,000		7,000
Fair Value	45,188,000		42,900,000
Available-for-sale [Abstract]
Securities with losses under 12 months, Fair Value, Available-for-sale	3,616,000
Securities with losses under 12 months, Gross Unrealized Loss, Available-for-sale	186,000
Securities with losses over 12 months, Fair Value, Available-for-sale	0
Securities with losses over 12 months, Gross Unrealized Loss, Available-for-sale	0
Total, Fair Value, Available-for-sale	3,616,000
Total, Gross Unrealized Loss, Available-for-sale	186,000
Held-to-maturity [Abstract]
Securities with losses under 12 months, Fair Value, Held-to-maturity	42,768,000		1,128,000
Securities with losses under 12 months, Gross Unrealized Loss, Held-to-maturity	2,441,000		7,000
Securities with losses over 12 months, Fair Value, Held-to-maturity	0		0
Securities with losses over 12 months, Gross Unrealized Loss, Held-to-maturity	0		0
Total securities, Fair Value, Held-to-maturity	42,768,000		1,128,000
Total securities, Gross Unrealized Loss, Held-to-maturity	2,441,000		7,000
GSE Mortgage-Backed Securities [Member]
Available-for-sale Securities [Abstract]
Amortized Cost	151,517,000		172,932,000
Gross Unrealized Gains	2,833,000		5,887,000
Gross Unrealized Losses	1,776,000		0
Fair Value	152,574,000		178,819,000
Held-to-maturity [Abstract]
Amortized Cost	81,081,000		89,383,000
Gross Unrealized Gains	798,000		2,819,000
Gross Unrealized Losses	746,000		0
Fair Value	81,133,000		92,202,000
Available-for-sale [Abstract]
Securities with losses under 12 months, Fair Value, Available-for-sale	74,925,000
Securities with losses under 12 months, Gross Unrealized Loss, Available-for-sale	1,776,000
Securities with losses over 12 months, Fair Value, Available-for-sale	0
Securities with losses over 12 months, Gross Unrealized Loss, Available-for-sale	0
Total, Fair Value, Available-for-sale	74,925,000
Total, Gross Unrealized Loss, Available-for-sale	1,776,000
Held-to-maturity [Abstract]
Securities with losses under 12 months, Fair Value, Held-to-maturity	32,373,000
Securities with losses under 12 months, Gross Unrealized Loss, Held-to-maturity	746,000
Securities with losses over 12 months, Fair Value, Held-to-maturity	0
Securities with losses over 12 months, Gross Unrealized Loss, Held-to-maturity	0
Total securities, Fair Value, Held-to-maturity	32,373,000
Total securities, Gross Unrealized Loss, Held-to-maturity	746,000
Other Asset-Backed Securities [Member]
Available-for-sale Securities [Abstract]
Amortized Cost	25,424,000		12,245,000
Gross Unrealized Gains	371,000		497,000
Gross Unrealized Losses	73,000		0
Fair Value	25,722,000		12,742,000
Available-for-sale [Abstract]
Securities with losses under 12 months, Fair Value, Available-for-sale	13,275,000
Securities with losses under 12 months, Gross Unrealized Loss, Available-for-sale	73,000
Securities with losses over 12 months, Fair Value, Available-for-sale	0
Securities with losses over 12 months, Gross Unrealized Loss, Available-for-sale	0
Total, Fair Value, Available-for-sale	13,275,000
Total, Gross Unrealized Loss, Available-for-sale	73,000
Collateralized Mortgage Obligations: Residential [Member]
Available-for-sale Securities [Abstract]
Amortized Cost	76,244,000		101,381,000
Gross Unrealized Gains	313,000		652,000
Gross Unrealized Losses	2,242,000		47,000
Fair Value	74,315,000		101,986,000
Held-to-maturity [Abstract]
Amortized Cost	14,493,000		5,009,000
Gross Unrealized Gains	0		0
Gross Unrealized Losses	819,000		0
Fair Value	13,674,000		5,009,000
Available-for-sale [Abstract]
Securities with losses under 12 months, Fair Value, Available-for-sale	49,749,000		10,085,000
Securities with losses under 12 months, Gross Unrealized Loss, Available-for-sale	2,241,000		45,000
Securities with losses over 12 months, Fair Value, Available-for-sale	66,000		96,000
Securities with losses over 12 months, Gross Unrealized Loss, Available-for-sale	1,000		2,000
Total, Fair Value, Available-for-sale	49,815,000		10,181,000
Total, Gross Unrealized Loss, Available-for-sale	2,242,000		47,000
Held-to-maturity [Abstract]
Securities with losses under 12 months, Fair Value, Held-to-maturity	13,674,000
Securities with losses under 12 months, Gross Unrealized Loss, Held-to-maturity	819,000
Securities with losses over 12 months, Fair Value, Held-to-maturity	0
Securities with losses over 12 months, Gross Unrealized Loss, Held-to-maturity	0
Total securities, Fair Value, Held-to-maturity	13,674,000
Total securities, Gross Unrealized Loss, Held-to-maturity	819,000
Collateralized Mortgage Obligations: Commercial [Member]
Available-for-sale Securities [Abstract]
Amortized Cost	27,177,000		28,528,000
Gross Unrealized Gains	441,000		1,233,000
Gross Unrealized Losses	88,000		0
Fair Value	27,530,000		29,761,000
Held-to-maturity [Abstract]
Amortized Cost	15,993,000		16,232,000
Gross Unrealized Gains	129,000		581,000
Gross Unrealized Losses	0		0
Fair Value	16,122,000		16,813,000
Available-for-sale [Abstract]
Securities with losses under 12 months, Fair Value, Available-for-sale	4,385,000
Securities with losses under 12 months, Gross Unrealized Loss, Available-for-sale	88,000
Securities with losses over 12 months, Fair Value, Available-for-sale	0
Securities with losses over 12 months, Gross Unrealized Loss, Available-for-sale	0
Total, Fair Value, Available-for-sale	4,385,000
Total, Gross Unrealized Loss, Available-for-sale	88,000
Collateralized Debt Obligations [Member]
Available-for-sale Securities [Abstract]
Amortized Cost	464,000		464,000
Gross Unrealized Gains	127,000		0
Gross Unrealized Losses	0		0
Fair Value	$ 591,000		$ 464,000

[1] Derived from audited financial statements.

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Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Securities available-for-sale (Before tax) [Abstract]
Change in unrealized gain during period	$ (95)	$ 1,417	$ (10,203)	$ 2,725
Reclassification adjustment for gains included in net income	(25)	(69)	(229)	(204)
Total other comprehensive income (loss), before tax	(120)	1,348	(10,432)	2,521
Securities available-for-sale: (Tax Effect) [Abstract]
Change in unrealized gain during period	33	(496)	3,571	(954)
Reclassification adjustment for gains included in net income	9	24	80	71
Total other comprehensive income (loss), tax effect	42	(472)	3,651	(883)
Securities available-for-sale (Net of Tax) [Abstract]
Change in unrealized gain during period	(62)	921	(6,632)	1,771
Reclassification adjustment for gains included in net income	(16)	(45)	(149)	(133)
Total other comprehensive income (loss), net of tax	(78)	876	(6,781)	1,638
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Gains on securities	25	69	229	204
Tax expense	(1,588)	(1,062)	(4,588)	(3,096)
Net earnings	3,540	2,649	10,631	8,013
Unrealized Gains and Losses on Securities Available-for-Sale [Member] | Reclassification Out Of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Gains on securities	(25)	(69)	(229)	(204)
Tax expense	9	24	80	71
Net earnings	$ (16)	$ (45)	$ (149)	$ (133)

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Credit Quality of Loans and Allowance for Loan Losses, Credit Quality Indicators and Aging (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012		Sep. 30, 2012
Credit Risk Profile [Abstract]
Loans	$ 1,145,023	$ 1,046,940	[1]	$ 808,833
Age Analysis of Past Due Loans by Class of Loans [Abstract]
30-59 Days Past Due	8,448	8,081
60-89 Days Past Due	456	2,900
Greater than 90 Days Past Due	5,908	7,580
Total Past Due	14,812	18,561
Current	1,130,211	1,028,379
Total Loans	1,145,023	1,046,940
Recorded Investment > 90 days and Accruing	744	1,986
Commercial, Financial and Agricultural [Member]
Credit Risk Profile [Abstract]
Loans	423,073	315,655
Age Analysis of Past Due Loans by Class of Loans [Abstract]
30-59 Days Past Due	1,934	2,220
60-89 Days Past Due	150	321
Greater than 90 Days Past Due	1,454	2,580
Total Past Due	3,538	5,121
Current	419,535	310,534
Total Loans	423,073	315,655
Recorded Investment > 90 days and Accruing	33	1,019
Commercial Real Estate - Construction [Member]
Credit Risk Profile [Abstract]
Loans	57,861	58,350
Age Analysis of Past Due Loans by Class of Loans [Abstract]
30-59 Days Past Due	58	66
60-89 Days Past Due	0	96
Greater than 90 Days Past Due	129	101
Total Past Due	187	263
Current	57,674	58,087
Total Loans	57,861	58,350
Recorded Investment > 90 days and Accruing	0	0
Commercial Real Estate - Other [Member]
Credit Risk Profile [Abstract]
Loans	401,080	414,384
Age Analysis of Past Due Loans by Class of Loans [Abstract]
30-59 Days Past Due	3,815	4,123
60-89 Days Past Due	102	2,108
Greater than 90 Days Past Due	2,903	3,577
Total Past Due	6,820	9,808
Current	394,260	404,576
Total Loans	401,080	414,384
Recorded Investment > 90 days and Accruing	665	952
Commercial Total [Member]
Credit Risk Profile [Abstract]
Loans	882,014	788,389
Residential - Construction [Member]
Credit Risk Profile [Abstract]
Loans	18,352	16,984
Age Analysis of Past Due Loans by Class of Loans [Abstract]
30-59 Days Past Due	0	0
60-89 Days Past Due	0	0
Greater than 90 Days Past Due	0	0
Total Past Due	0	0
Current	18,352	16,984
Total Loans	18,352	16,984
Recorded Investment > 90 days and Accruing	0	0
Residential - Prime [Member]
Credit Risk Profile [Abstract]
Loans	142,431	142,858
Age Analysis of Past Due Loans by Class of Loans [Abstract]
30-59 Days Past Due	1,968	1,140
60-89 Days Past Due	144	239
Greater than 90 Days Past Due	1,064	1,121
Total Past Due	3,176	2,500
Current	139,255	140,358
Total Loans	142,431	142,858
Recorded Investment > 90 days and Accruing	0	0
Residential - Subprime [Member]
Credit Risk Profile [Abstract]
Loans	0	0
Age Analysis of Past Due Loans by Class of Loans [Abstract]
30-59 Days Past Due	0	0
60-89 Days Past Due	0	0
Greater than 90 Days Past Due	0	0
Total Past Due	0	0
Current	0	0
Total Loans	0	0
Recorded Investment > 90 days and Accruing	0	0
Residential Total [Member]
Credit Risk Profile [Abstract]
Loans	160,783	159,842
Consumer - Credit Card [Member]
Credit Risk Profile [Abstract]
Loans	5,845	6,807
Age Analysis of Past Due Loans by Class of Loans [Abstract]
30-59 Days Past Due	36	24
60-89 Days Past Due	3	2
Greater than 90 Days Past Due	33	15
Total Past Due	72	41
Current	5,773	6,766
Total Loans	5,845	6,807
Recorded Investment > 90 days and Accruing	33	15
Consumer - Other [Member]
Credit Risk Profile [Abstract]
Loans	88,877	83,754
Age Analysis of Past Due Loans by Class of Loans [Abstract]
30-59 Days Past Due	510	421
60-89 Days Past Due	53	134
Greater than 90 Days Past Due	325	186
Total Past Due	888	741
Current	87,989	83,013
Total Loans	88,877	83,754
Recorded Investment > 90 days and Accruing	13	0
Finance Leases Commercial [Member]
Credit Risk Profile [Abstract]
Loans	5,340	5,769
Age Analysis of Past Due Loans by Class of Loans [Abstract]
30-59 Days Past Due	0	0
60-89 Days Past Due	0	0
Greater than 90 Days Past Due	0	0
Total Past Due	0	0
Current	5,340	5,769
Total Loans	5,340	5,769
Recorded Investment > 90 days and Accruing	0	0
Other Loans [Member]
Credit Risk Profile [Abstract]
Loans	2,164	2,379
Age Analysis of Past Due Loans by Class of Loans [Abstract]
30-59 Days Past Due	127	87
60-89 Days Past Due	4	0
Greater than 90 Days Past Due	0	0
Total Past Due	131	87
Current	2,033	2,292
Total Loans	2,164	2,379
Recorded Investment > 90 days and Accruing	0	0
Consumer Total [Member]
Credit Risk Profile [Abstract]
Loans	102,226	98,709
Pass [Member] | Commercial, Financial and Agricultural [Member]
Credit Risk Profile [Abstract]
Loans	415,480	304,219
Pass [Member] | Commercial Real Estate - Construction [Member]
Credit Risk Profile [Abstract]
Loans	56,932	54,737
Pass [Member] | Commercial Real Estate - Other [Member]
Credit Risk Profile [Abstract]
Loans	378,331	396,077
Pass [Member] | Commercial Total [Member]
Credit Risk Profile [Abstract]
Loans	850,743	755,033
Percentage of Total Loans (in hundredths)	96.46%	95.76%
Pass [Member] | Residential - Construction [Member]
Credit Risk Profile [Abstract]
Loans	18,335	16,785
Pass [Member] | Residential - Prime [Member]
Credit Risk Profile [Abstract]
Loans	138,424	137,681
Pass [Member] | Residential - Subprime [Member]
Credit Risk Profile [Abstract]
Loans	0	0
Pass [Member] | Residential Total [Member]
Credit Risk Profile [Abstract]
Loans	156,759	154,466
Percentage of Total Loans (in hundredths)	97.50%	96.64%
Special mention [Member] | Commercial, Financial and Agricultural [Member]
Credit Risk Profile [Abstract]
Loans	2,581	5,748
Special mention [Member] | Commercial Real Estate - Construction [Member]
Credit Risk Profile [Abstract]
Loans	0	684
Special mention [Member] | Commercial Real Estate - Other [Member]
Credit Risk Profile [Abstract]
Loans	4,500	6,224
Special mention [Member] | Commercial Total [Member]
Credit Risk Profile [Abstract]
Loans	7,081	12,656
Percentage of Total Loans (in hundredths)	0.80%	1.61%
Special mention [Member] | Residential - Construction [Member]
Credit Risk Profile [Abstract]
Loans	0	0
Special mention [Member] | Residential - Prime [Member]
Credit Risk Profile [Abstract]
Loans	727	1,612
Special mention [Member] | Residential - Subprime [Member]
Credit Risk Profile [Abstract]
Loans	0	0
Special mention [Member] | Residential Total [Member]
Credit Risk Profile [Abstract]
Loans	727	1,612
Percentage of Total Loans (in hundredths)	0.45%	1.01%
Substandard [Member] | Commercial, Financial and Agricultural [Member]
Credit Risk Profile [Abstract]
Loans	4,771	4,503
Substandard [Member] | Commercial Real Estate - Construction [Member]
Credit Risk Profile [Abstract]
Loans	929	2,925
Substandard [Member] | Commercial Real Estate - Other [Member]
Credit Risk Profile [Abstract]
Loans	18,145	7,514
Substandard [Member] | Commercial Total [Member]
Credit Risk Profile [Abstract]
Loans	23,845	14,942
Percentage of Total Loans (in hundredths)	2.70%	1.90%
Substandard [Member] | Residential - Construction [Member]
Credit Risk Profile [Abstract]
Loans	17	199
Substandard [Member] | Residential - Prime [Member]
Credit Risk Profile [Abstract]
Loans	3,280	3,565
Substandard [Member] | Residential - Subprime [Member]
Credit Risk Profile [Abstract]
Loans	0	0
Substandard [Member] | Residential Total [Member]
Credit Risk Profile [Abstract]
Loans	3,297	3,764
Percentage of Total Loans (in hundredths)	2.05%	2.35%
Doubtful [Member] | Commercial, Financial and Agricultural [Member]
Credit Risk Profile [Abstract]
Loans	241	1,185
Doubtful [Member] | Commercial Real Estate - Construction [Member]
Credit Risk Profile [Abstract]
Loans	0	4
Doubtful [Member] | Commercial Real Estate - Other [Member]
Credit Risk Profile [Abstract]
Loans	104	4,569
Doubtful [Member] | Commercial Total [Member]
Credit Risk Profile [Abstract]
Loans	345	5,758
Percentage of Total Loans (in hundredths)	0.04%	0.73%
Performing [Member]
Credit Risk Profile [Abstract]
Percentage of Total Loans (in hundredths)	99.62%	99.57%
Performing [Member] | Consumer - Credit Card [Member]
Credit Risk Profile [Abstract]
Loans	5,811	6,792
Performing [Member] | Consumer - Other [Member]
Credit Risk Profile [Abstract]
Loans	88,518	83,347
Performing [Member] | Finance Leases Commercial [Member]
Credit Risk Profile [Abstract]
Loans	5,340	5,769
Performing [Member] | Other Loans [Member]
Credit Risk Profile [Abstract]
Loans	2,164	2,379
Performing [Member] | Consumer Total [Member]
Credit Risk Profile [Abstract]
Loans	101,833	98,287
Nonperforming [Member]
Credit Risk Profile [Abstract]
Percentage of Total Loans (in hundredths)	0.38%	0.43%
Nonperforming [Member] | Consumer - Credit Card [Member]
Credit Risk Profile [Abstract]
Loans	34	15
Nonperforming [Member] | Consumer - Other [Member]
Credit Risk Profile [Abstract]
Loans	359	407
Nonperforming [Member] | Finance Leases Commercial [Member]
Credit Risk Profile [Abstract]
Loans	0	0
Nonperforming [Member] | Other Loans [Member]
Credit Risk Profile [Abstract]
Loans	0	0
Nonperforming [Member] | Consumer Total [Member]
Credit Risk Profile [Abstract]
Loans	$ 393	$ 422

[1] Derived from audited financial statements.

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Fair Value Measurement (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Measurement [Abstract]

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The table below presents information about certain assets and liabilities measured at fair value on a recurring basis (in thousands):

			Fair Value Measurements at September 30, 2013 using:
Description	Assets / Liabilities Measured at Fair Value  at September 30, 2013		Level 1		Level 2		Level 3
Available-for-sale securities:
U.S. Government sponsored enterprises	$	11,419	$	-	$	11,419	$	-
Obligations of state and political subdivisions		66,524		-		66,524		-
GSE mortgage-backed securities		152,574		-		152,574		-
Other asset-backed securities		25,722		-		25,722		-
Collateralized mortgage obligations: residential		74,315		-		74,315		-
Collateralized mortgage obligations: commercial		27,530		-		27,530		-
Collateralized debt obligations		591		-		591		-
	$	358,675	$	-	$	358,675	$	-

			Fair Value Measurements at December 31, 2012 using:
Description	Assets / Liabilities Measured at Fair Value  at December 31, 2012		Level 1		Level 2		Level 3
Available-for-sale securities:
U.S. Government sponsored enterprises	$	13,424	$	-	$	13,424	$	-
Obligations of state and political subdivisions		87,421		-		87,421		-
GSE mortgage-backed securities		178,819		-		178,819		-
Collateralized mortgage obligations: residential		101,986		-		101,986		-
Collateralized mortgage obligations: commercial		29,761		-		29,761		-
Other asset-backed securities		12,742		-		12,742		-
Collateralized debt obligations		464		-		464		-
	$	424,617	$	-	$	424,617	$	-

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis and are included in the table below (in thousands).  Impaired loans are Level 2 assets measured using appraisals from external parties of the collateral less any prior liens.  Other real estate properties are also Level 2 assets measured using appraisals from external parties.  Acquired loans are Level 3 assets measured on a nonrecurring basis.

			Fair Value Measurements Using
	September 30, 2013		Level 1		Level 2		Level 3
Assets
Acquired loans with deteriorated credit quality	$	1,016	$	-	$	-	$	1,016
Other real estate		6,672		-		6,672		-
Impaired loans, excluding acquired loans		2,152		-		2,152		-
Total	$	9,840	$	-	$	8,824	$	1,016

			Fair Value Measurements Using
	December 31, 2012		Level 1		Level 2		Level 3
Assets
Acquired loans with deteriorated credit quality	$	4,521	$	-	$	-	$	4,521
Other real estate		7,496		-		7,496		-
Impaired loans, excluding acquired loans		2,245		-		2,245		-
Total	$	14,262	$	-	$	9,741	$	4,521

Carrying Amounts and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments are as follows at September 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements at September 30, 2013 Using:
	Carrying  Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	43,434	$	43,434	$	-	$	-
Securities available-for-sale		358,675		-		358,675		-
Securities held-to-maturity		159,141		-		156,117		-
Other investments		10,951		10,951		-		-
Loans, net		1,136,356		-		-		1,145,675
Cash surrender value of life insurance policies		13,392		-		13,392		-
Financial liabilities:
Non-interest-bearing deposits		380,048		-		380,048		-
Interest-bearing deposits		1,126,078		-		878,091		249,227
Securities sold under agreements to repurchase		73,909		73,909		-		-
Notes payable		53,059		-		25,000		29,212
Junior subordinated debentures		29,384		-		22,167		7,590

			Fair Value Measurements at December 31, 2012 Using:
	Carrying Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	73,573	$	73,573	$	-	$	-
Time deposits held in banks		881		-		-		883
Securities available-for-sale		424,617		-		424,617		-
Securities held-to-maturity		153,524		-		156,924		-
Other investments		8,310		8,310		-		-
Loans, net		1,039,570		-		-		1,046,495
Cash surrender value of life insurance policies		13,183		-		13,183		-
Financial liabilities:
Non-interest-bearing deposits		380,557		-		380,557		-
Interest-bearing deposits		1,171,347		-		859,183		314,783
Securities sold under agreements to repurchase		41,447		41,447		-		-
Notes payable		29,128		-		-		29,128
Junior subordinated debentures		29,384		-		22,167		7,776

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Consolidated Statement of Shareholders' Equity (unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2012	$ 41,997	$ 1,139	$ 110,603	$ 8,159	$ (3,286)	$ 30,629	$ 189,241	[1]
Balance (in shares) at Dec. 31, 2012	131,971	11,386,611
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings	0	0	0	0	0	10,631	10,631
Dividends on Series B and Series C Preferred Stock	0	0	0	0	0	(1,152)	(1,152)
Dividends on common stock, $0.23 per share	0	0	0	0	0	(2,587)	(2,587)
Common stock issued under employee stock plans, including tax benefit	0	1	43	0	0	0	44
Common stock issued under employee stock plans, including tax benefit (in shares)		17,082
Stock option and restricted stock compensation expense	0	0	233	0	0	0	233
Change in accumulated other comprehensive income	0	0	0	(6,781)	0	0	(6,781)
Balance at Sep. 30, 2013	$ 41,997	$ 1,140	$ 110,879	$ 1,378	$ (3,286)	$ 37,521	$ 189,629
Balance (in shares) at Sep. 30, 2013	131,971	11,403,693

[1] Derived from audited financial statements.

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Consolidated Statements of Cash Flows (unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:
Net earnings	$ 10,631	$ 8,013
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	4,106	2,745
Accretion of purchase accounting adjustments	(4,631)	(1,675)
Provision for loan losses	2,250	1,550
Provision for deferred tax expense	2,181	1,599
Amortization of premiums on securities, net	3,432	1,317
Amortization of other investments	11	11
Stock option expense	212	87
Restricted stock expense	21	42
Net gain on sale of investment securities	(229)	(204)
Net loss on sale of other real estate owned	205	168
Net write down of other real estate owned	380	475
Net loss on sale/disposal of premises and equipment	118	6
Change in accrued interest receivable	(174)	45
Change in accrued interest payable	(348)	(312)
Change in other assets & other liabilities, net	189	(59)
Net cash provided by operating activities	18,354	13,808
Cash flows from investing activities:
Net decrease in time deposits in other banks	881	1
Proceeds from maturities and calls of securities available-for-sale	59,430	100,502
Proceeds from maturities and calls of securities held-to-maturity	19,617	14,946
Proceeds from sale of securities available-for-sale	55,808	6,558
Purchases of securities available-for-sale	(68,043)	(79,195)
Purchases of securities held-to-maturity	(26,382)	(32,816)
Proceeds from redemption of other investments	1,000	500
Purchases of other investments	(2,653)	(185)
Net change in loans	(90,091)	(63,014)
Purchases of premises and equipment	(10,955)	(6,239)
Proceeds from sale of premises and equipment	45	0
Proceeds from sale of other real estate owned	940	550
Net cash used in investing activities	(60,403)	(58,392)
Cash flows from financing activities:
Change in deposits	(45,232)	15,063
Change in securities sold under agreements to repurchase	32,462	9,155
Change in federal funds purchased	3,900	0
Borrowings on Federal Home Loan Bank advances	25,000	100
Repayments of Federal Home Loan Bank advances	(43)	(100)
Repayments of notes payable	(750)	0
Proceeds and tax benefit from exercise of stock options	30	96
Tax benefit from issuance of restricted stock	14	0
Payment of dividends on preferred stock	(1,052)	(1,180)
Payment of dividends on common stock	(2,419)	(2,198)
Net cash provided by financing activities	11,910	20,936
Net decrease in cash and cash equivalents	(30,139)	(23,648)
Cash and cash equivalents, beginning of period	73,573	83,303
Cash and cash equivalents, end of period	43,434	59,655
Supplemental cash flow information:
Interest paid	5,106	4,797
Income taxes paid	3,500	2,215
Noncash investing and financing activities
Transfer of loans to other real estate	701	722
Accrued common stock dividends	912	745
Accrued preferred stock dividends	468	400
Financed sales of other real estate	0	290
Transfer of investment from available-for-sale to other investments	$ 0	$ 509

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Other Investments

9 Months Ended

Sep. 30, 2013

Other Investments [Abstract]

Other Investments

3.  Other Investments

The Company is required to own stock in the Federal Reserve Bank of Atlanta (“FRB-Atlanta”) and as a member of the Federal Home Loan Bank system, owns stock in the Federal Home Loan Bank of Dallas (“FHLB-Dallas”).  The Company accounts for FRB-Atlanta and FHLB-Dallas stock as other investments along with stock ownership in two correspondent banks and a Community Reinvestment Act (“CRA”) investment in a Senior Housing Crime Prevention program in Louisiana. The CRA investment consisted of three government-sponsored agency mortgage-backed securities purchased by the Company and held by the Senior Housing Crime Prevention program.  The majority of the interest earned on the securities provides income to the program.

For impairment analysis, the Company reviews financial statements and regulatory capital ratios for each of the banks in which the Company owns stock to verify financial stability and regulatory compliance with capital requirements.  As of September 30, 2013 and December 31, 2012, based upon quarterly reviews, management determined that there was no impairment in the bank stocks held as other investments.

The aggregate carrying amount of other investments consisted of the following (in thousands):

	September 30, 2013		December 31, 2012
FRB-Atlanta	$	3,789	$	2,258
FHLB-Dallas		2,804		1,862
Other bank stocks		2,063		2,063
Other stocks		187		7
CRA investment		2,108		2,120
	$	10,951	$	8,310

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Basis of Presentation

9 Months Ended

Sep. 30, 2013

Basis of Presentation [Abstract]

Basis of Presentation

1.Basis of Presentation

The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the financial position of MidSouth Bancorp, Inc. (the “Company”) and its subsidiaries as of September 30, 2013 and the results of their operations and their cash flows for the periods presented. The interim financial information should be read in conjunction with the annual consolidated financial statements and the notes thereto included in the Company’s 2012 Annual Report on Form 10-K.

The results of operations for the nine-month period ended September 30, 2013 are not necessarily indicative of the results to be expected for the entire year.

Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

Summary of Significant Accounting Policies — The accounting and reporting policies of the Company conform with GAAP and general practices within the banking industry.  There have been no material changes or developments in the application of accounting principles or in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies and Estimates as disclosed in our 2012 Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements — ASU 2013-01, Balance Sheet (Topic 210):  Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities applies to derivatives accounted for in accordance with ASC 815 (Derivatives and Hedging), including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities lending transactions that are either offset in accordance with ASC 210-20-45 or ASC 815-10-45 or subject to an enforceable master netting arrangement or similar agreement.  The effective date of this Update is for fiscal years beginning on or after January 1, 2013 and interim periods within those annual periods.  Adoption of this Update did not impact the Company’s consolidated financial statements or the interim notes to the consolidated financial statements.

ASU 2013-02, Comprehensive Income (Topic 220):  Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income was issued in the first quarter of 2013 to improve the reporting of reclassifications out of accumulated other comprehensive income (“AOCI”).  The ASU requires information regarding the impact to net earnings of the reclassification on significant amounts out of AOCI to be presented on either the face of the statement of earnings or in the notes to the financial statements.  The amendments in this Update do not change the current reporting requirements for net earnings or AOCI.  For public entities, the amendments in this Update are effective prospectively for reporting periods beginning after December 15, 2012.  In compliance with the Update, the information required has been included in the Consolidated Statements of Comprehensive Income and Note 5 in these unaudited consolidated financial statements.

Reclassifications — Certain reclassifications have been made to the prior years’ financial statements in order to conform to the classifications adopted for reporting in 2013.  The reclassifications had no impact on net earnings or shareholders equity.

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Credit Quality of Loans and Allowance for Loan Losses, Summary of Loan Portfolio (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012		Sep. 30, 2012
Loan portfolio [Abstract]
Total loans	$ 1,145,023	$ 1,046,940	[1]	$ 808,833
Less allowance for loan losses	(8,667)	(7,370)	[1]
Loans, net	1,136,356	1,039,570	[1]
Commercial, Financial and Agricultural [Member]
Loan portfolio [Abstract]
Total loans	423,073	315,655
Lease Financing Receivable [Member]
Loan portfolio [Abstract]
Total loans	5,340	5,769
Real Estate - Construction [Member]
Loan portfolio [Abstract]
Total loans	76,213	75,334
Real Estate - Commercial [Member]
Loan portfolio [Abstract]
Total loans	401,080	414,384
Real Estate - Residential [Member]
Loan portfolio [Abstract]
Total loans	142,431	142,858
Installment Loans to Individuals [Member]
Loan portfolio [Abstract]
Total loans	94,722	90,561
Other [Member]
Loan portfolio [Abstract]
Total loans	$ 2,164	$ 2,379

[1] Derived from audited financial statements.

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Credit Quality of Loans and Allowance for Loan Losses, Impaired Loans by Class of Loans (Details) (USD $)	9 Months Ended			12 Months Ended
	Sep. 30, 2013		Sep. 30, 2012	Dec. 31, 2012
With no related allowance recorded [Abstract]
Recorded Investment	$ 3,057,000			$ 5,554,000
Unpaid Principal Balance	3,691,000			6,201,000
Related Allowance	0			0
Average Recorded Investment	3,410,000			4,769,000
Interest Income Recognized	15,000			71,000
With an allowance recorded [Abstract]
Recorded Investment	2,158,000			1,886,000
Unpaid Principal Balance	2,272,000			1,886,000
Related Allowance	698,000			627,000
Average Recorded Investment	2,100,000			2,424,000
Interest Income Recognized	16,000			41,000
Totals [Abstract]
Recorded Investment	5,215,000			7,440,000
Unpaid Principal Balance	5,963,000			8,087,000
Related Allowance	698,000			627,000
Average Recorded Investment	5,510,000			7,193,000
Interest Income Recognized	31,000			112,000
Loans on Nonaccrual Status [Abstract]
Loans on Nonaccrual Status	5,760,000	[1]		8,276,000	[1]
Interest lost on nonaccrual loans	431,000		502,000
Interest received on nonaccrual loans	246,000		25,000
Commercial, Financial and Agricultural [Member]
With no related allowance recorded [Abstract]
Recorded Investment	423,000			564,000
Unpaid Principal Balance	563,000			675,000
Related Allowance	0			0
Average Recorded Investment	520,000			861,000
Interest Income Recognized	3,000			5,000
With an allowance recorded [Abstract]
Recorded Investment	1,027,000			1,072,000
Unpaid Principal Balance	1,141,000			1,072,000
Related Allowance	419,000			391,000
Average Recorded Investment	1,029,000			1,128,000
Interest Income Recognized	2,000			21,000
Totals [Abstract]
Related Allowance	419,000			391,000
Loans on Nonaccrual Status [Abstract]
Loans on Nonaccrual Status	1,488,000	[1]		1,777,000	[1]
Commercial Real Estate - Construction [Member]
With no related allowance recorded [Abstract]
Recorded Investment	63,000			771,000
Unpaid Principal Balance	63,000			770,000
Related Allowance	0			0
Average Recorded Investment	64,000			834,000
Interest Income Recognized	0			1,000
With an allowance recorded [Abstract]
Recorded Investment	101,000			165,000
Unpaid Principal Balance	101,000			165,000
Related Allowance	36,000			57,000
Average Recorded Investment	149,000			85,000
Interest Income Recognized	1,000			7,000
Totals [Abstract]
Related Allowance	36,000			57,000
Loans on Nonaccrual Status [Abstract]
Loans on Nonaccrual Status	166,000	[1]		941,000	[1]
Commercial Real Estate - Other [Member]
With no related allowance recorded [Abstract]
Recorded Investment	1,921,000			2,530,000
Unpaid Principal Balance	2,395,000			3,059,000
Related Allowance	0			0
Average Recorded Investment	2,137,000			1,780,000
Interest Income Recognized	6,000			38,000
With an allowance recorded [Abstract]
Recorded Investment	364,000			381,000
Unpaid Principal Balance	364,000			381,000
Related Allowance	54,000			35,000
Average Recorded Investment	283,000			811,000
Interest Income Recognized	11,000			3,000
Totals [Abstract]
Related Allowance	54,000			35,000
Loans on Nonaccrual Status [Abstract]
Loans on Nonaccrual Status	2,363,000	[1]		3,009,000	[1]
Consumer - Other [Member]
With no related allowance recorded [Abstract]
Recorded Investment	74,000			114,000
Unpaid Principal Balance	74,000			122,000
Related Allowance	0			0
Average Recorded Investment	67,000			81,000
Interest Income Recognized	1,000			1,000
With an allowance recorded [Abstract]
Recorded Investment	248,000			216,000
Unpaid Principal Balance	248,000			216,000
Related Allowance	134,000			114,000
Average Recorded Investment	252,000			228,000
Interest Income Recognized	1,000			6,000
Totals [Abstract]
Related Allowance	134,000			114,000
Loans on Nonaccrual Status [Abstract]
Loans on Nonaccrual Status	352,000	[1]		409,000	[1]
Residential - Prime [Member]
With no related allowance recorded [Abstract]
Recorded Investment	576,000			1,575,000
Unpaid Principal Balance	596,000			1,575,000
Related Allowance	0			0
Average Recorded Investment	622,000			1,213,000
Interest Income Recognized	5,000			26,000
With an allowance recorded [Abstract]
Recorded Investment	418,000			52,000
Unpaid Principal Balance	418,000			52,000
Related Allowance	55,000			30,000
Average Recorded Investment	387,000			172,000
Interest Income Recognized	1,000			4,000
Totals [Abstract]
Related Allowance	55,000			30,000
Loans on Nonaccrual Status [Abstract]
Loans on Nonaccrual Status	1,391,000	[1]		2,140,000	[1]
Finance Leases Commercial [Member]
Loans on Nonaccrual Status [Abstract]
Loans on Nonaccrual Status	0	[1]		0	[1]
Other Loans [Member]
Loans on Nonaccrual Status [Abstract]
Loans on Nonaccrual Status	0	[1]		0	[1]
Commercial Total [Member]
With an allowance recorded [Abstract]
Related Allowance	509,000			483,000
Totals [Abstract]
Recorded Investment	3,899,000			5,483,000
Unpaid Principal Balance	4,627,000			6,122,000
Related Allowance	509,000			483,000
Average Recorded Investment	4,182,000			5,499,000
Interest Income Recognized	23,000			75,000
Consumer Total [Member]
With an allowance recorded [Abstract]
Related Allowance	134,000			114,000
Totals [Abstract]
Recorded Investment	322,000			330,000
Unpaid Principal Balance	322,000			338,000
Related Allowance	134,000			114,000
Average Recorded Investment	319,000			309,000
Interest Income Recognized	2,000			7,000
Residential Total [Member]
With an allowance recorded [Abstract]
Related Allowance	55,000			30,000
Totals [Abstract]
Recorded Investment	994,000			1,627,000
Unpaid Principal Balance	1,014,000			1,627,000
Related Allowance	55,000			30,000
Average Recorded Investment	1,009,000			1,385,000
Interest Income Recognized	6,000			30,000
Consumer - Credit Card [Member]
Loans on Nonaccrual Status [Abstract]
Loans on Nonaccrual Status	0	[1]		0	[1]
Residential Construction [Member]
Loans on Nonaccrual Status [Abstract]
Loans on Nonaccrual Status	0	[1]		0	[1]
Residential - Subprime [Member]
Loans on Nonaccrual Status [Abstract]
Loans on Nonaccrual Status	$ 0	[1]		$ 0	[1]

[1] Balances have been adjusted from previously reported amounts for discounts associated with purchase credit impaired loans.

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Goodwill and Intangibles (Details) (USD $)	3 Months Ended			9 Months Ended
	Jun. 30, 2013	Mar. 31, 2013		Sep. 30, 2013 Bond		Sep. 30, 2013 Core Deposit Intangible Assets [Member]	Dec. 31, 2012 Core Deposit Intangible Assets [Member]
Changes to carrying amount of goodwill [Roll Forward]
Goodwill, beginning of period		$ 42,781,000	[1]	$ 42,781,000	[1]
Adjustment to goodwill	(190,000)	(105,000)
Goodwill, end of period				42,486,000
Goodwill acquired during the year				415,000
Goodwill market value adjustment				254,000
Number of bonds held in investment portfolio at acquisition				2
Increase to income tax receivable from PSB acquisition				190,000
Net of deferred taxes adjustment resulted in reduction to goodwill				295,000
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount						11,674,000	11,674,000
Less accumulated amortization						(3,457,000)	(2,627,000)
Net carrying amount						$ 8,217,000	$ 9,047,000

[1] Derived from audited financial statements.

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Consolidated Balance Sheets (unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Assets
Cash and due from banks, reserves	$ 9,837	$ 14,083
Securities available-for-sale, at cost	356,555	412,065
Securities held-to-maturity, at fair value	$ 156,117	$ 156,924
Stockholders' equity:
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, authorized (in shares)	30,000,000	30,000,000
Common stock, issued (in shares)	11,403,693	11,386,611
Common stock, outstanding (in shares)	11,253,216	11,236,134
Treasury stock (in shares)	150,477	150,477
Preferred Stock Series B [Member]
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, authorized (in shares)	5,000,000	5,000,000
Preferred stock, issued (in shares)	32,000	32,000
Preferred stock, outstanding (in shares)	32,000	32,000
Preferred Stock Series C [Member]
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, authorized (in shares)	100,000	100,000
Preferred stock, issued (in shares)	99,971	99,971
Preferred stock, outstanding (in shares)	99,971	99,971

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Earnings Per Common Share

9 Months Ended

Sep. 30, 2013

Earnings Per Common Share [Abstract]

Earnings Per Common Share

6.  Earnings Per Common Share

Following is a summary of the information used in the computation of earnings per common share (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Net earnings available to common shareholders	$	3,072	$	2,249	$	9,479	$	6,833
Dividends on Series C preferred stock		100		-		300		-
Adjusted net earnings available to common shareholders	$	3,172	$	2,249	$	9,779	$	6,833
Weighted average number of common shares outstanding used in computation of basic earnings per common share		11,253		10,478		11,243		10,471
Effect of dilutive securities:
Stock options		51		29		47		17
Restricted stock		-		11		-		11
Preferred stock		565		-		563		-
Weighted average number of common shares outstanding plus effect of dilutive securities used in computation of diluted earnings per common share		11,869		10,518		11,853		10,499

Options to acquire 134,611 and 18,331 shares of common stock were not included in computing diluted earnings per share for the quarters and nine months ended September 30, 2013 and 2012, respectively, because the effects of these shares were anti-dilutive as a result of the exercise price of such options.  A total of 104,384 shares subject to an outstanding warrant issued in connection with the Capital Purchase Plan transaction were anti-dilutive as a result of their exercise price and not included in the computation of diluted earnings per share for the quarter and nine months ended September 30, 2012.

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Consolidated Statements of Comprehensive Income (Loss) (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Consolidated Statements of Comprehensive Income (unaudited) [Abstract]
Net earnings	$ 3,540	$ 2,649	$ 10,631	$ 8,013
Unrealized gains (losses) on securities available-for-sale:
Unrealized gains (losses) arising during the year	(95)	1,417	(10,203)	2,725
Less: reclassification adjustment for gains on sales of securities available-for-sale	(25)	(69)	(229)	(204)
Total other comprehensive income (loss), before tax	(120)	1,348	(10,432)	2,521
Income tax effect related to items of other comprehensive income	(42)	472	(3,651)	883
Total other comprehensive income (loss), net of tax	(78)	876	(6,781)	1,638
Total comprehensive income	$ 3,462	$ 3,525	$ 3,850	$ 9,651

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Consolidated Balance Sheets (unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Assets
Cash and due from banks, including required reserves of $9,837 and $14,083, respectively	$ 43,177	$ 46,297	[1]
Interest-bearing deposits in banks	257	20,276	[1]
Federal funds sold	0	7,000	[1]
Time deposits held in banks	0	881	[1]
Securities available-for-sale, at fair value (cost of $356,555 at September 30, 2013 and $412,065 at December 31, 2012)	358,675	424,617	[1]
Securities held-to-maturity (fair value of $156,117 at September 30, 2013 and $156,924 at December 31, 2012)	159,141	153,524	[1]
Other investments	10,951	8,310	[1]
Loans	1,145,023	1,046,940	[1]
Allowance for loan losses	(8,667)	(7,370)	[1]
Loans, net	1,136,356	1,039,570	[1]
Bank premises and equipment, net	70,147	63,461	[1]
Accrued interest receivable	6,865	6,691	[1]
Goodwill	42,486	42,781	[1]
Intangibles	8,217	9,047	[1]
Cash surrender value of life insurance	13,392	13,183	[1]
Other real estate	6,672	7,496	[1]
Other assets	6,471	8,594	[1]
Total assets	1,862,807	1,851,728	[1]
Deposits:
Noninterest-bearing	380,048	380,557	[1]
Interest-bearing	1,126,078	1,171,347	[1]
Total deposits	1,506,126	1,551,904	[1]
Federal funds purchased	3,900	0	[1]
Securities sold under agreements to repurchase	73,909	41,447	[1]
Notes payable	53,059	29,128	[1]
Junior subordinated debentures	29,384	29,384	[1]
Other liabilities	6,800	10,624	[1]
Total liabilities	1,673,178	1,662,487	[1]
Commitments and contingencies			[1]
Shareholders' equity:
Common stock, $0.10 par value; 30,000,000 shares authorized, 11,403,693 and 11,386,611 issued and 11,253,216 and 11,236,134 outstanding at September 30, 2013 and December 31, 2012, respectively	1,140	1,139	[1]
Additional paid-in capital	110,879	110,603	[1]
Accumulated other comprehensive income	1,378	8,159	[1]
Treasury stock - 150,477 shares at September 30, 2013 and December 31, 2012, at cost	(3,286)	(3,286)	[1]
Retained earnings	37,521	30,629	[1]
Total shareholders' equity	189,629	189,241	[1]
Total liabilities and shareholders' equity	1,862,807	1,851,728	[1]
Preferred Stock Series B [Member]
Shareholders' equity:
Preferred stock	32,000	32,000	[1]
Preferred Stock Series C [Member]
Shareholders' equity:
Preferred stock	$ 9,997	$ 9,997	[1]

[1] Derived from audited financial statements.

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Credit Quality of Loans and Allowance for Loan Losses, Allowance for Loan Losses by Segment (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Allowance for loan losses by portfolio [Roll Forward]
Beginning balance	$ 7,370	$ 7,276
Charge-offs	(1,166)	(1,699)
Recoveries	213	247
Provision	2,250	1,550
Ending balance	8,667	7,374
Ending balance: individually evaluated for impairment	698	660
Ending balance: collectively evaluated for impairment	7,969	6,714
Loans [Abstract]
Ending balance	1,145,023	808,833	1,046,940	[1]
Ending balance: individually evaluated for impairment	5,215	8,442
Ending balance: collectively evaluated for impairment	1,138,792	800,391
Ending balance: loans acquired with deteriorated credit quality	1,016
Commercial, Financial and Agricultural [Member]
Allowance for loan losses by portfolio [Roll Forward]
Beginning balance	1,535	1,734
Charge-offs	(461)	(683)
Recoveries	61	169
Provision	3,090	574
Ending balance	4,225	1,794
Ending balance: individually evaluated for impairment	419	461
Ending balance: collectively evaluated for impairment	3,806	1,333
Loans [Abstract]
Ending balance	423,073	266,046
Ending balance: individually evaluated for impairment	1,450	2,302
Ending balance: collectively evaluated for impairment	421,623	263,744
Ending balance: loans acquired with deteriorated credit quality	0
Real Estate - Construction [Member]
Allowance for loan losses by portfolio [Roll Forward]
Beginning balance	2,147	1,661
Charge-offs	0	0
Recoveries	5	9
Provision	(1,081)	378
Ending balance	1,071	2,048
Ending balance: individually evaluated for impairment	36	40
Ending balance: collectively evaluated for impairment	1,035	2,008
Loans [Abstract]
Ending balance	76,213	57,727
Ending balance: individually evaluated for impairment	164	926
Ending balance: collectively evaluated for impairment	76,049	56,801
Ending balance: loans acquired with deteriorated credit quality	0
Real Estate - Commercial [Member]
Allowance for loan losses by portfolio [Roll Forward]
Beginning balance	2,166	2,215
Charge-offs	(18)	(495)
Recoveries	21	0
Provision	(661)	282
Ending balance	1,508	2,002
Ending balance: individually evaluated for impairment	54	64
Ending balance: collectively evaluated for impairment	1,454	1,938
Loans [Abstract]
Ending balance	401,080	293,579
Ending balance: individually evaluated for impairment	2,285	3,144
Ending balance: collectively evaluated for impairment	398,080	290,435
Ending balance: loans acquired with deteriorated credit quality	715
Real Estate - Residential [Member]
Allowance for loan losses by portfolio [Roll Forward]
Beginning balance	936	936
Charge-offs	(129)	(126)
Recoveries	34	3
Provision	(46)	114
Ending balance	795	927
Ending balance: individually evaluated for impairment	55	0
Ending balance: collectively evaluated for impairment	740	927
Loans [Abstract]
Ending balance	142,431	110,735
Ending balance: individually evaluated for impairment	994	1,771
Ending balance: collectively evaluated for impairment	141,136	108,964
Ending balance: loans acquired with deteriorated credit quality	301
Consumer [Member]
Allowance for loan losses by portfolio [Roll Forward]
Beginning balance	543	710
Charge-offs	(558)	(395)
Recoveries	92	66
Provision	962	197
Ending balance	1,039	578
Ending balance: individually evaluated for impairment	134	95
Ending balance: collectively evaluated for impairment	905	483
Loans [Abstract]
Ending balance	94,722	73,334
Ending balance: individually evaluated for impairment	322	299
Ending balance: collectively evaluated for impairment	94,400	73,035
Ending balance: loans acquired with deteriorated credit quality	0
Finance Leases Commercial [Member]
Allowance for loan losses by portfolio [Roll Forward]
Beginning balance	41	19
Charge-offs	0	0
Recoveries	0	0
Provision	(16)	4
Ending balance	25	23
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	25	23
Loans [Abstract]
Ending balance	5,340	5,041
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	5,340	5,041
Ending balance: loans acquired with deteriorated credit quality	0
Other [Member]
Allowance for loan losses by portfolio [Roll Forward]
Beginning balance	2	1
Charge-offs	0	0
Recoveries	0	0
Provision	2	1
Ending balance	4	2
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	4	2
Loans [Abstract]
Ending balance	2,164	2,371
Ending balance: individually evaluated for impairment	0	0
Ending balance: collectively evaluated for impairment	2,164	2,371
Ending balance: loans acquired with deteriorated credit quality	$ 0

[1] Derived from audited financial statements.

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Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Common Share [Abstract]

Information Used in the Computation of Earnings per Common Share

Following is a summary of the information used in the computation of earnings per common share (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Net earnings available to common shareholders	$	3,072	$	2,249	$	9,479	$	6,833
Dividends on Series C preferred stock		100		-		300		-
Adjusted net earnings available to common shareholders	$	3,172	$	2,249	$	9,779	$	6,833
Weighted average number of common shares outstanding used in computation of basic earnings per common share		11,253		10,478		11,243		10,471
Effect of dilutive securities:
Stock options		51		29		47		17
Restricted stock		-		11		-		11
Preferred stock		565		-		563		-
Weighted average number of common shares outstanding plus effect of dilutive securities used in computation of diluted earnings per common share		11,869		10,518		11,853		10,499

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Fair Value Measurement, by Balance Sheet Grouping (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Financial assets [Abstract]
Securities available-for-sale	$ 358,675	$ 424,617	[1]
Carrying Value [Member]
Financial assets [Abstract]
Cash and cash equivalents	43,434	73,573
Time deposits held in banks		881
Securities available-for-sale	358,675	424,617
Securities held-to-maturity	159,141	153,524
Other investments	10,951	8,310
Loans, net	1,136,356	1,039,570
Cash surrender value of life insurance policies	13,392	13,183
Financial liabilities [Abstract]
Non-interest-bearing deposits	380,048	380,577
Interest-bearing deposits	1,126,078	1,171,347
Securities sold under agreements to repurchase	73,909	41,447
Notes payable	53,059	29,128
Junior subordinated debentures	29,384	29,384
Fair Value [Member] | Level 1 [Member]
Financial assets [Abstract]
Cash and cash equivalents	43,434	73,573
Time deposits held in banks		0
Securities available-for-sale	0	0
Securities held-to-maturity	0	0
Other investments	10,951	8,310
Loans, net	0	0
Cash surrender value of life insurance policies	0	0
Financial liabilities [Abstract]
Non-interest-bearing deposits	0	0
Interest-bearing deposits	0	0
Securities sold under agreements to repurchase	73,909	41,447
Notes payable	0	0
Junior subordinated debentures	0	0
Fair Value [Member] | Level 2 [Member]
Financial assets [Abstract]
Cash and cash equivalents	0	0
Time deposits held in banks		0
Securities available-for-sale	358,675	424,617
Securities held-to-maturity	156,117	156,924
Other investments	0	0
Loans, net	0	0
Cash surrender value of life insurance policies	13,392	13,183
Financial liabilities [Abstract]
Non-interest-bearing deposits	380,048	380,557
Interest-bearing deposits	878,091	859,183
Securities sold under agreements to repurchase	0	0
Notes payable	25,000	0
Junior subordinated debentures	22,167	22,167
Fair Value [Member] | Level 3 [Member]
Financial assets [Abstract]
Cash and cash equivalents	0	0
Time deposits held in banks		883
Securities available-for-sale	0	0
Securities held-to-maturity	0	0
Other investments	0	0
Loans, net	1,145,675	1,046,495
Cash surrender value of life insurance policies	0	0
Financial liabilities [Abstract]
Non-interest-bearing deposits	0	0
Interest-bearing deposits	249,227	314,783
Securities sold under agreements to repurchase	0	0
Notes payable	29,212	29,128
Junior subordinated debentures	$ 7,590	$ 7,776

[1] Derived from audited financial statements.

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Earnings Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Earnings Per Common Share [Abstract]
Net earnings available to common shareholders	$ 3,072	$ 2,249	$ 9,479	$ 6,833
Dividends on Series C preferred stock	100	0	300	0
Adjusted net earnings available to common shareholders	$ 3,172	$ 2,249	$ 9,779	$ 6,833
Weighted average number of common shares outstanding used in computation of basic earnings per common share (in shares)	11,253,000	10,478,000	11,243,000	10,471,000
Effect of dilutive securities [Abstract]
Stock options (in shares)	51,000	29,000	47,000	17,000
Restricted stock (in shares)	0	11,000	0	11,000
Preferred stock (in shares)	565,000	0	563,000	0
Weighted average number of common shares outstanding plus effect of dilutive securities used in computation of diluted earnings per common share (in shares)	11,869,000	10,518,000	11,853,000	10,499,000
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded from computing diluted earnings per share (in shares)	134,611	18,331	134,611	18,331
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded from computing diluted earnings per share (in shares)		104,384		104,384

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Declaration of Dividends (Details) (USD $)	3 Months Ended			1 Months Ended	3 Months Ended			1 Months Ended
	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Oct. 31, 2013 Subsequent Event [Member]	Sep. 30, 2013 Series C Preferred Stock [Member]	Jun. 30, 2013 Series C Preferred Stock [Member]	Mar. 31, 2013 Series C Preferred Stock [Member]	Oct. 31, 2013 Series C Preferred Stock [Member] Subsequent Event [Member]
Dividends Payable [Line Items]
Dividends on common stock (in dollars per share)	$ 0.08	$ 0.08	$ 0.07	$ 0.08
Dividends payable recorded date	Sep. 16, 2013	Jun. 14, 2013	Mar. 15, 2013	Dec. 16, 2013	Oct. 01, 2013	Jul. 01, 2013	Apr. 01, 2013	Jan. 02, 2014
Dividends payable declared date	Jul. 24, 2013	May 22, 2013	Jan. 31, 2013	Oct. 16, 2013	Jul. 24, 2013	May 22, 2013	Jan. 31, 2013	Oct. 16, 2013
Dividends payable, date to be paid	Oct. 01, 2013	Jul. 01, 2013	Apr. 01, 2013	Jan. 02, 2014	Oct. 15, 2013	Jul. 15, 2013	Apr. 15, 2013	Jan. 15, 2014
Preferred stock dividend rate (in hundredth)					1.00%	1.00%	1.00%	1.00%

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Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2013

Other Comprehensive Income (Loss) [Abstract]

Other Comprehensive Income (Loss)

5.  Other Comprehensive Income (Loss)

The following is a summary of the tax effects allocated to each component of other comprehensive income (loss) (in thousands):

	Three Months Ended September 30,
	2013								2012
	Before Tax Amount			Tax Effect		Net of Tax  Amount			Before Tax  Amount			Tax Effect			Net of Tax Amount
Other comprehensive income (loss):
Securities available-for-sale:
Change in unrealized gain during period	$	(95	)	$	33	$	(62	)	$	1,417		$	(496	)	$	921
Reclassification adjustment for gains included in net income		(25	)		9		(16	)		(69	)		24			(45	)
Total other comprehensive income (loss)	$	(120	)	$	42	$	(78	)	$	1,348		$	(472	)	$	876

	Nine Months Ended September 30,
	2013								2012
	Before Tax Amount			Tax Effect		Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount
Other comprehensive income (loss):
Securities available-for-sale:
Change in unrealized gain during period	$	(10,203	)	$	3,571	$	(6,632	)	$	2,725		$	(954	)	$	1,771
Reclassification adjustment for gains included in net income		(229	)		80		(149	)		(204	)		71			(133	)
Total other comprehensive income (loss)	$	(10,432	)	$	3,651	$	(6,781	)	$	2,521		$	(883	)	$	1,638

The reclassifications out of accumulated other comprehensive income into net income are presented below (in thousands):

	Three Months Ended September 30,
	2013				2012
Details about  Accumulated Other Comprehensive Income Components	Reclassifications Out  of Accumulated Other Comprehensive  Income			Income Statement Line  Item	Reclassifications Out  of Accumulated Other  Comprehensive  Income			Income Statement Line Item
Unrealized gains and losses on securities available-for-sale:
	$	(25	)	Gain on securities, net	$	(69	)	Gain on securities, net
		9		Tax expense		24		Tax expense
	$	(16	)	Net of tax	$	(45	)	Net of tax

	Nine Months Ended September 30,
	2013				2012
Details about  Accumulated Other  Comprehensive Income Components	Reclassifications Out  of Accumulated Other  Comprehensive  Income			Income Statement Line  Item	Reclassifications Out  of Accumulated Other  Comprehensive  Income			Income Statement Line  Item
Unrealized gains and losses on securities available-for-sale:
	$	(229	)	Gain on securities, net	$	(204	)	Gain on securities, net
		80		Tax expense		71		Tax expense
	$	(149	)	Net of tax	$	(133	)	Net of tax

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Credit Quality of Loans and Allowance for Loan Losses, Aggregate Allowance for Loan Losses and Related Party Lending (Details) (USD $)	9 Months Ended
	Sep. 30, 2013 Segment		Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Number of industry segment concentration above threshold limit	1
Threshold percentage of loan portfolio (in hundredths)	10.00%
Loans exposure in oil and gas industry	$ 189,800,000
Exposure in oil and gas industry specified as percentage of total loans (in hundredths)	16.60%
Loans with exposure in commercial real estate	458,900,000
Loans on nonaccrual status	5,760,000	[1]	8,276,000	[1]
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans with exposure in commercial real estate	349,200,000
Percentage of CRE loans secured by owner-occupied commercial properties (in hundredths)	61.20%
Loans on nonaccrual status	$ 2,500,000
Nonaccrual status of loans specified as percentage of total CRE loans (in hundredths)	0.50%

[1] Balances have been adjusted from previously reported amounts for discounts associated with purchase credit impaired loans.

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Goodwill and Intangibles

9 Months Ended

Sep. 30, 2013

Goodwill and Intangibles [Abstract]

Goodwill and Intangibles

8. Goodwill and Intangibles

Changes to the carrying amount of goodwill for the nine months ended September 30, 2013 are provided in the following table (in thousands):

Balance, December 31, 2012	$	42,781
1st quarter 2013 adjustment to goodwill		(105	)
2nd quarter 2013 adjustment to goodwill		(190	)
Balance, September 30, 2013	$	42,486

The adjustments to goodwill made during the nine months ended September 30, 2013 resulted from reclassification of a $415,000 liability assumed through the PSB acquisition, from a $254,000 market value adjustment on two bonds held in the PSB investment portfolio at acquisition and from a $190,000 increase to the amount of income tax receivable recorded from the PSB acquisition.  The adjustments were made as additional information existing at the time of the acquisition was reviewed and affected the amount recorded for the assumed liability and the market value of the two bonds.  Net of deferred taxes, the adjustment resulted in a $295,000 reduction to goodwill recorded in the PSB acquisition.  The adjustments to goodwill had no impact on net earnings or shareholders’ equity.

A summary of core deposit intangible assets as of September 30, 2013 and December 31, 2012 is as follows (in thousands):

	September 30, 2013			December 31, 2012
Gross carrying amount	$	11,674		$	11,674
Less accumulated amortization		(3,457	)		(2,627	)
Net carrying amount	$	8,217		$	9,047

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Credit Quality of Loans and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2013

Credit Quality of Loans and Allowance for Loan Losses [Abstract]

Credit Quality of Loans and Allowance for Loan Losses

4.   Credit Quality of Loans and Allowance for Loan Losses

The loan portfolio consisted of the following (in thousands):

	September 30, 2013			December 31, 2012
Commercial, financial and agricultural	$	423,073		$	315,655
Lease financing receivable		5,340			5,769
Real estate - construction		76,213			75,334
Real estate - commercial		401,080			414,384
Real estate - residential		142,431			142,858
Installment loans to individuals		94,722			90,561
Other		2,164			2,379
		1,145,023			1,046,940
Less allowance for loan losses		(8,667	)		(7,370	)
	$	1,136,356		$	1,039,570

The Company monitors loan concentrations and evaluates individual customer and aggregate industry leverage, profitability, risk rating distributions, and liquidity for each major standard industry classification segment.  At September 30, 2013, one industry segment concentration, the oil and gas industry, constituted more than 10% of the loan portfolio.  The Company’s exposure in the oil and gas industry, including related service and manufacturing industries, totaled approximately $189.8 million, or 16.6% of total loans.  Additionally, the Company’s exposure to loans secured by commercial real estate is monitored.  At September 30, 2013, loans secured by commercial real estate (including commercial construction, farmland and multifamily loans) totaled approximately $458.9 million.  Of the $458.9 million, $349.2 million represent CRE loans, 61.2% of which are secured by owner-occupied commercial properties.  Of the $458.9 million in loans secured by commercial real estate, $2.5 million, or 0.5%, were on nonaccrual status at September 30, 2013.

Allowance for Loan Losses

The allowance for loan losses is a valuation account available to absorb probable losses on loans. All losses are charged to the allowance for loan losses when the loss actually occurs or when a determination is made that a loss is likely to occur. Recoveries are credited to the allowance for loan losses at the time of recovery.  Quarterly, the probable level of losses in the existing portfolio is estimated through consideration of various factors.  Based on these estimates, the allowance for loan losses is increased by charges to earnings and decreased by charge‑offs (net of recoveries).

The allowance is composed of general reserves and specific reserves.  General reserves are determined by applying loss percentages to segments of the portfolio.  The loss percentages are based on each segment’s historical loss experience, generally over the past twelve to eighteen months, and adjustment factors derived from conditions in the Company’s internal and external environment.  All loans considered to be impaired are evaluated on an individual basis to determine specific reserve allocations in accordance with GAAP.  Loans for which specific reserves are provided are excluded from the calculation of general reserves.

Loans acquired in business combinations are initially recorded at fair value, which includes an estimate of credit losses expected to be realized over the remaining lives of the loans, and therefore no corresponding allowance for loan losses is recorded for these loans at acquisition. Methods utilized to estimate any subsequently required allowance for loan losses for acquired loans not deemed credit-impaired at acquisition are similar to originated loans; however, the estimate of loss is based on the unpaid principal balance and then compared to any remaining unaccreted purchase discount. To the extent that the calculated loss is greater than the remaining unaccreted purchase discount, an allowance is recorded for such difference.

The Company has an internal loan review department that is independent of the lending function to challenge and corroborate the loan grade assigned by the lender and to provide additional analysis in determining the adequacy of the allowance for loan losses.

A rollforward of the activity within the allowance for loan losses by loan type and recorded investment in loans for the nine months ended September 30, 2013 and 2012 is as follows (in thousands):

	September 30, 2013
				Real Estate
	Coml, Fin, and Agric			Construction			Commercial			Residential			Consumer			Finance  Leases  Coml			Other		Total
Allowance for loan losses:
Beginning balance	$	1,535		$	2,147		$	2,166		$	936		$	543		$	41		$	2	$	7,370
Charge-offs		(461	)		-			(18	)		(129	)		(558	)		-			-		(1,166	)
Recoveries		61			5			21			34			92			-			-		213
Provision		3,090			(1,081	)		(661	)		(46	)		962			(16	)		2		2,250
Ending balance	$	4,225		$	1,071		$	1,508		$	795		$	1,039		$	25		$	4	$	8,667
Ending balance:
individually evaluated for impairment	$	419		$	36		$	54		$	55		$	134		$	-		$	-	$	698
Ending balance:
collectively evaluated for impairment	$	3,806		$	1,035		$	1,454		$	740		$	905		$	25		$	4	$	7,969
Loans:
Ending balance	$	423,073		$	76,213		$	401,080		$	142,431		$	94,722		$	5,340		$	2,164	$	1,145,023
Ending balance:
individually evaluated for impairment	$	1,450		$	164		$	2,285		$	994		$	322		$	-		$	-	$	5,215
Ending balance:
collectively evaluated for impairment	$	421,623		$	76,049		$	398,080		$	141,136		$	94,400		$	5,340		$	2,164	$	1,138,792
Ending balance:
loans acquired with deteriorated credit quality	$	-		$	-		$	715		$	301		$	-		$	-		$	-	$	1,016

	September 30, 2012
				Real Estate
	Coml, Fin, and Agric			Construction		Commercial			Residential			Consumer			Finance  Leases Coml		Other		Total
Allowance for loan losses:
Beginning balance	$	1,734		$	1,661	$	2,215		$	936		$	710		$	19	$	1	$	7,276
Charge-offs		(683	)		-		(495	)		(126	)		(395	)		-		-		(1,699	)
Recoveries		169			9		-			3			66			-		-		247
Provision		574			378		282			114			197			4		1		1,550
Ending balance	$	1,794		$	2,048	$	2,002		$	927		$	578		$	23	$	2	$	7,374
Ending balance:
individually evaluated for impairment	$	461		$	40	$	64		$	-		$	95		$	-	$	-	$	660
Ending balance:
collectively evaluated for impairment	$	1,333		$	2,008	$	1,938		$	927		$	483		$	23	$	2	$	6,714
Loans:
Ending balance	$	266,046		$	57,727	$	293,579		$	110,735		$	73,334		$	5,041	$	2,371	$	808,833
Ending balance:
individually evaluated for impairment	$	2,302		$	926	$	3,144		$	1,771		$	299		$	-	$	-	$	8,442
Ending balance:
collectively evaluated for impairment	$	263,744		$	56,801	$	290,435		$	108,964		$	73,035		$	5,041	$	2,371	$	800,391

Non-Accrual and Past Due Loans

Loans are considered past due if the required principal and interest payment have not been received as of the date such payments were due.  Loans are placed on non-accrual status when, in management’s opinion, the probability of collection of interest is deemed insufficient to warrant further accrual.  For loans placed on non-accrual status, the accrual of interest is discontinued and subsequent payments received are applied to the principal balance.  Interest income is recorded after principal has been satisfied and as payments are received.  Non-accrual loans may be returned to accrual status if all principal and interest amounts contractually owed are reasonably assured of repayment within a reasonable period and there is a period of at least six months to one year of repayment performance by the borrower depending on the contractual payment terms.

An age analysis of past due loans (including both accruing and non-accruing loans) is as follows (in thousands):

	September 30, 2013 (1)
	30-59 Days Past Due		60-89 Days  Past Due		Greater than  90 Days Past  Due		Total Past Due		Current		Total Loans		Recorded  Investment >  90 days and Accruing
Commercial, financial, and agricultural	$	1,934	$	150	$	1,454	$	3,538	$	419,535	$	423,073	$	33
Commercial real estate - construction		58		-		129		187		57,674		57,861		-
Commercial real estate - other		3,815		102		2,903		6,820		394,260		401,080		665
Consumer - credit card		36		3		33		72		5,773		5,845		33
Consumer - other		510		53		325		888		87,989		88,877		13
Residential - construction		-		-		-		-		18,352		18,352		-
Residential - prime		1,968		144		1,064		3,176		139,255		142,431		-
Residential - subprime		-		-		-		-		-		-		-
Other loans		127		4		-		131		2,033		2,164		-
Finance leases commercial		-		-		-		-		5,340		5,340		-
	$	8,448	$	456	$	5,908	$	14,812	$	1,130,211	$	1,145,023	$	744

	December 31, 2012 (1)
	30-59 Days  Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total  Past Due		Current		Total Loans		Recorded  Investment > 90 days and Accruing
Commercial, financial, and agricultural	$	2,220	$	321	$	2,580	$	5,121	$	310,534	$	315,655	$	1,019
Commercial real estate - construction		66		96		101		263		58,087		58,350		-
Commercial real estate - other		4,123		2,108		3,577		9,808		404,576		414,384		952
Consumer - credit card		24		2		15		41		6,766		6,807		15
Consumer - other		421		134		186		741		83,013		83,754		-
Residential - construction		-		-		-		-		16,984		16,984		-
Residential - prime		1,140		239		1,121		2,500		140,358		142,858		-
Residential - subprime		-		-		-		-		-		-		-
Other loans		87		-		-		87		2,292		2,379		-
Finance leases commercial		-		-		-		-		5,769		5,769		-
	$	8,081	$	2,900	$	7,580	$	18,561	$	1,028,379	$	1,046,940	$	1,986

Non-accrual loans are as follows (in thousands):

	September 20, 2013 (1)		December 31, 2012 (1)
Commercial, financial, and agricultural	$	1,488	$	1,777
Commercial real estate – construction		166		941
Commercial real estate - other		2,363		3,009
Consumer - credit card		-		-
Consumer - other		352		409
Residential - construction		-		-
Residential - prime		1,391		2,140
Residential - subprime		-		-
Other loans		-		-
Finance leases commercial		-		-
	$	5,760	$	8,276

⁽¹⁾ Balances have been adjusted from previously reported amounts for discounts associated with purchase credit impaired loans.

The amount of interest that would have been recorded on non-accrual loans, had the loans not been classified as non-accrual, totaled approximately $431,000 and $502,000 for the nine months ended September 30, 2013 and 2012, respectively.  Interest actually received on non-accrual loans at September 30, 2013 and 2012 was $246,000 and $25,000, respectively.

Impaired Loans

Loans are considered impaired when, based upon current information, it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  All loans classified as special mention, substandard, or doubtful, based on credit risk rating factors, and are reviewed for impairment.  An allowance for each impaired loan is calculated based on the present value of expected future cash flows discounted at the loan’s effective interest rate or at the loan’s observable market price or the fair value of the collateral if the loan is collaterally dependent.  All impaired loans are reviewed, at a minimum, on a quarterly basis.  Existing valuations are reviewed to determine if additional discounts or new appraisals are required.  After this review, when comparing the resulting collateral valuation to the outstanding loan balance, if the discounted collateral value exceeds the loan balance no specific allocation is reserved.  Acquired impaired loans are generally not subject to individual evaluation for impairment and are not reported with impaired loans or troubled debt restructurings, even if they would otherwise qualify for such treatment.

Loans that are individually evaluated for impairment are as follows (in thousands):

	September 30, 2013
	Recorded  Investment		Unpaid  Principal  Balance		Related Allowance		Average  Recorded  Investment		Interest Income Recognized
With no related allowance recorded:
Commercial, financial, and agricultural	$	423	$	563	$	-	$	520	$	3
Commercial real estate – construction		63		63		-		64		-
Commercial real estate – other		1,921		2,395		-		2,137		6
Consumer – other		74		74		-		67		1
Residential – prime		576		596		-		622		5
Subtotal:	$	3,057	$	3,691	$	-	$	3,410	$	15
With an allowance recorded:
Commercial, financial, and agricultural		1,027		1,141		419		1,029		2
Commercial real estate – construction		101		101		36		149		1
Commercial real estate – other		364		364		54		283		11
Consumer – other		248		248		134		252		1
Residential – prime		418		418		55		387		1
Subtotal:	$	2,158	$	2,272	$	698	$	2,100	$	16
Totals:
Commercial		3,899		4,627		509		4,182		23
Consumer		322		322		134		319		2
Residential		994		1,014		55		1,009		6
Grand total:	$	5,215	$	5,963	$	698	$	5,510	$	31

	December 31, 2012
	Recorded Investment		Unpaid  Principal  Balance		Related  Allowance		Average  Recorded Investment		Interest  Income  Recognized
With no related allowance recorded:
Commercial, financial, and agricultural	$	564	$	675	$	-	$	861	$	5
Commercial real estate – construction		771		770		-		834		1
Commercial real estate – other		2,530		3,059		-		1,780		38
Consumer – other		114		122		-		81		1
Residential – prime		1,575		1,575		-		1,213		26
Subtotal:	$	5,554	$	6,201	$	-	$	4,769	$	71
With an allowance recorded:
Commercial, financial, and agricultural		1,072		1,072		391		1,128		21
Commercial real estate – construction		165		165		57		85		7
Commercial real estate – other		381		381		35		811		3
Consumer – other		216		216		114		228		6
Residential – prime		52		52		30		172		4
Subtotal:	$	1,886	$	1,886	$	627	$	2,424	$	41
Totals:
Commercial		5,483		6,122		483		5,499		75
Consumer		330		338		114		309		7
Residential		1,627		1,627		30		1,385		30
Grand total:	$	7,440	$	8,087	$	627	$	7,193	$	112

Credit Quality

The Company manages credit risk by observing written underwriting standards and lending policy established by the Board of Directors and management to govern all lending activities.  The risk management program requires that each individual loan officer review his or her portfolio on a quarterly basis and assign recommended credit ratings on each loan.  These efforts are supplemented by independent reviews performed by a loan review officer and other validations performed by the internal audit department.  The results of the reviews are reported directly to the Audit Committee of the Board of Directors.

Loans can be classified into the following three risk rating grades: pass, special mention, and substandard/doubtful.  Factors considered in determining a risk rating grade include debt service capacity, capital structure/liquidity, management, collateral quality, industry risk, company trends/operating performance, repayment source, revenue diversification/customer concentration, quality of financial information, and financing alternatives.  Pass grade signifies the highest quality of loans to loans with reasonable credit risk, which may include borrowers with marginally adequate financial performance, but have the ability to repay the debt.  Special mention loans have potential weaknesses that warrant extra attention from the loan officer and other management personnel, but still have the ability to repay the debt.  Substandard classification includes loans with well-defined weaknesses with risk of potential loss.  Loans classified as doubtful are considered to have little recovery value and are charged off.

The following tables present the classes of loans by risk rating (in thousands):

	September 30, 2013
Commercial Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Commercial, Financial, and Agricultural		Commercial Real Estate Construction		Commercial Real Estate Other		Commercial Total		% of Total Commercial
Pass	$	415,480	$	56,932	$	378,331	$	850,743		96.46	%
Special mention		2,581		-		4,500		7,081		0.80	%
Substandard		4,771		929		18,145		23,845		2.70	%
Doubtful		241		-		104		345		0.04	%
	$	423,073	$	57,861	$	401,080	$	882,014		100.00	%

Residential Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Residential Construction		Residential Prime		Residential Subprime		Residential  Total		% of Total  Residential
Pass	$	18,335	$	138,424	$	-	$	156,759		97.50	%
Special mention		-		727		-		727		0.45	%
Substandard		17		3,280		-		3,297		2.05	%
	$	18,352	$	142,431	$	-	$	160,783		100.00	%

Consumer and Commercial Credit Exposure
Credit Risk Profile Based on Payment Activity
	Consumer  Credit Card		Consumer  Other		Finance Leases  Commercial		Other Loans		Total		% of Total
Performing	$	5,811	$	88,518	$	5,340	$	2,164	$	101,833		99.62	%
Nonperforming		34		359		-		-		393		0.38	%
	$	5,845	$	88,877	$	5,340	$	2,164	$	102,226		100.00	%

	December 31, 2012
Commercial Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Commercial,  Financial, and Agricultural		Commercial  Real Estate  Construction		Commercial  Real Estate  Other		Commercial  Total		% of Total Commercial
Pass	$	304,219	$	54,737	$	396,077	$	755,033		95.76	%
Special Mention		5,748		684		6,224		12,656		1.61	%
Substandard		4,503		2,925		7,514		14,942		1.90	%
Doubtful		1,185		4		4,569		5,758		0.73	%
	$	315,655	$	58,350	$	414,384	$	788,389		100.00	%

Residential Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Residential  Construction		Residential Prime		Residential Subprime		Residential  Total		% of Total  Residential
Pass	$	16,785	$	137,681	$	-	$	154,466		96.64	%
Special mention		-		1,612		-		1,612		1.01	%
Substandard		199		3,565		-		3,764		2.35	%
	$	16,984	$	142,858	$	-	$	159,842		100.00	%

Consumer and Commercial Credit Exposure
Credit Risk Profile Based on Payment Activity
	Consumer Credit Card		Consumer Other		Finance Leases  Commercial		Other Loans		Total		% of Total
Performing	$	6,792	$	83,347	$	5,769	$	2,379	$	98,287		99.57	%
Nonperforming		15		407		-		-		422		0.43	%
	$	6,807	$	83,754	$	5,769	$	2,379	$	98,709		100.00	%

Troubled Debt Restructurings

A troubled debt restructuring (“TDR”) is a restructuring of a debt made by the Company to a debtor for economic or legal reasons related to the debtor’s financial difficulties that it would not otherwise consider.  The Company grants the concession in an attempt to protect as much of its investment as possible.

Information about the Company’s TDRs is as follows (in thousands):

	September 30, 2013
	Current		Past Due  Greater than 30 Days		Nonaccrual TDRs		Total TDRs
Commercial, financial, and agricultural	$	23	$	-	$	343	$	366
Real estate - commercial		167		-		-		167
	$	190	$	-	$	343	$	533

	December 31, 2012
	Current		Past Due Greater than  30 Days		Nonaccrual TDRs		Total TDRs
Commercial, financial, and agricultural	$	-	$	-	$	353	$	353
Real estate - commercial		4,709		-		-		4,709
	$	4,709	$	-	$	353	$	5,062

The $4.5 million decrease from December 31, 2012 resulted primarily from payoffs related to two commercial credits previously classified as TDRs. During the three months ended September 30, 2013, there were no loans identified as a TDR, and there were no defaults on any loans that were modified as TDRs during the preceding twelve months.  During the three months ended September 30, 2012, there were no new loans identified as TDRs, and there were no defaults on any loans that were modified as TDRs during the preceding twelve months.  During the nine months ended September 30, 2013, one loan with a pre-modification balance of $27,000 was identified as a TDR, and there were no defaults on any loans that were modified as TDRs during the preceding twelve months.  During the nine months ended September 30, 2012, there were no new TDRs identified.  Three TDRs totaling $249,000 defaulted during the nine months ended September 30, 2012.  For purposes of the determination of an allowance for loan losses on these TDRs, as an identified TDR, the Company considers a loss probable on the loan and, as a result is reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology.  If it is determined losses are probable on such TDRs, either because of delinquency or other credit quality indicator, the Company establishes specific reserves for these loans.As of September 30, 2013, there were no commitments to lend additional funds to debtors owing sums to the Company whose terms have been modified in TDRs.

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Consolidated Statement of Shareholders' Equity (unaudited) (Parenthetical) (USD $)	9 Months Ended
	Sep. 30, 2013
Consolidated Statement of Shareholders' Equity (unaudited) [Abstract]
Dividends on common stock (in dollars per share)	$ 0.23

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Credit Quality of Loans and Allowance for Loan Losses, Troubled Debt Restructuring (Details) (USD $)	9 Months Ended
	Sep. 30, 2013 Contract	Dec. 31, 2012	Sep. 30, 2012 Contract
Troubled Debt Restructuring [Abstract]
Current	$ 190,000	$ 4,709,000
Past Due Greater than 30 Days	0	0
Nonaccrual TDRs	343,000	353,000
Total TDRs	533,000	5,062,000
Decrease in TDR	(4,500,000)
Pre-modified contracts identified as TDRs	1
Pre-modification balance identified as TDR	27,000
Number of TDR defaulted			3
TDR defaulted during the period			249,000
Commercial, Financial and Agricultural [Member]
Troubled Debt Restructuring [Abstract]
Current	23,000	0
Past Due Greater than 30 Days	0	0
Nonaccrual TDRs	343,000	353,000
Total TDRs	366,000	353,000
Real Estate - Commercial [Member]
Troubled Debt Restructuring [Abstract]
Current	167,000	4,709,000
Past Due Greater than 30 Days	0	0
Nonaccrual TDRs	0	0
Total TDRs	$ 167,000	$ 4,709,000

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2013

Investment Securities [Abstract]

Available-for-sale Investment Securities

The portfolio of investment securities consisted of the following (in thousands):

	September 30, 2013
	Amortized  Cost		Gross Unrealized  Gains		Gross Unrealized  Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	11,605	$	3	$	189	$	11,419
Obligations of state and political subdivisions		64,124		2,586		186		66,524
GSE mortgage-backed securities		151,517		2,833		1,776		152,574
Other asset-backed securities		25,424		371		73		25,722
Collateralized mortgage obligations: residential		76,244		313		2,242		74,315
Collateralized mortgage obligations: commercial		27,177		441		88		27,530
Collateralized debt obligation		464		127		-		591
	$	356,555	$	6,674	$	4,554	$	358,675

	December 31, 2012
	Amortized  Cost		Gross  Unrealized  Gains		Gross Unrealized  Losses		Fair Value
Available-for-sale:
U.S. Government sponsored enterprises	$	13,422	$	2	$	-	$	13,424
Obligations of state and political subdivisions		83,093		4,328		-		87,421
GSE mortgage-backed securities		172,932		5,887		-		178,819
Collateralized mortgage obligations: residential		101,381		652		47		101,986
Collateralized mortgage obligations: commercial		28,528		1,233		-		29,761
Other asset-backed securities		12,245		497		-		12,742
Collateralized debt obligation		464		-		-		464
	$	412,065	$	12,599	$	47	$	424,617

Held-to-maturity Securities

	September 30, 2013
	Amortized  Cost		Gross Unrealized  Gains		Gross  Unrealized  Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	47,574	$	55	$	2,441	$	45,188
GSE mortgage-backed securities		81,081		798		746		81,133
Collateralized mortgage obligations: residential		14,493		-		819		13,674
Collateralized mortgage obligations: commercial		15,993		129		-		16,122
	$	159,141	$	982	$	4,006	$	156,117

	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross  Unrealized Losses		Fair Value
Held-to-maturity:
Obligations of state and political subdivisions	$	42,900	$	7	$	7	$	42,900
GSE mortgage-backed securities		89,383		2,819		-		92,202
Collateralized mortgage obligations: residential		5,009		-		-		5,009
Collateralized mortgage obligations: commercial		16,232		581		-		16,813
	$	153,524	$	3,407	$	7	$	156,924

Amortized Cost and Fair Value of Debt Securities by Contractual Maturity

The amortized cost and fair value of debt securities at September 30, 2013 by contractual maturity are shown in the following table (in thousands) with the exception of other asset-backed securities, mortgage-backed securities, CMOs, and the collateralized debt obligation.   Expected maturities may differ from contractual maturities for mortgage-backed securities and CMOs because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
Available-for-sale:
Due in one year or less	$	11,031	$	11,150
Due after one year through five years		39,560		40,758
Due after five years through ten years		19,437		20,491
Due after ten years		5,701		5,544
Other asset-backed securities		25,424		25,722
Mortgage-backed securities and collateralized mortgage obligations:
Residential		227,761		226,889
Commercial		27,177		27,530
Collateralized debt obligation		464		591
	$	356,555	$	358,675

	Amortized  Cost		Fair Value
Held-to-maturity:
Due in one year or less	$	101	$	101
Due after one year through five years		2,204		2,187
Due after five years through ten years		6,983		6,823
Due after ten years		38,286		36,077
Mortgage-backed securities and collateralized mortgage obligations:
Residential		95,574		94,807
Commercial		15,993		16,122
	$	159,141	$	156,117

Investment Securities with Unrealized Losses

Details concerning investment securities with unrealized losses are as follows (in thousands):

	September 30, 2013
	Securities with losses  under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross  Unrealized Loss		Fair  Value		Gross  Unrealized  Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
U.S. Government sponsored enterprises	$	10,544	$	189	$	-	$	-	$	10,544	$	189
Obligations of state and political subdivisions		3,616		186		-		-		3,616		186
GSE mortgage-backed  securities		74,925		1,776		-		-		74,925		1,776
Other asset-backed securities		13,275		73		-		-		13,275		73
Collateralized mortgage  obligations:
residential		49,749		2,241		66		1		49,815		2,242
Collateralized mortgage  obligations:
commercial		4,385		88		-		-		4,385		88
	$	156,494	$	4,553	$	66	$	1	$	156,560	$	4,554

	December 31, 2012
	Securities with losses under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross Unrealized  Loss		Fair Value		Gross  Unrealized  Loss		Fair Value		Gross Unrealized Loss
Available-for-sale:
Collateralized mortgage obligations:
residential	$	10,085	$	45	$	96	$	2	$	10,181	$	47

	September 30, 2013
	Securities with losses under 12 months				Securities with losses  over 12 months				Total
	Fair Value		Gross  Unrealized  Loss		Fair Value		Gross Unrealized  Loss		Fair  Value		Gross Unrealized  Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	42,768	$	2,441	$	-	$	-	$	42,768	$	2,441
GSE mortgage-backed securities		32,373		746		-		-		32,373		746
Collateralized mortgage obligations:
residential		13,674		819		-		-		13,674		819
	$	88,815	$	4,006	$	-	$	-	$	88,815	$	4,006

	December 31, 2012
	Securities with losses  under 12 months				Securities with losses over 12 months				Total
	Fair Value		Gross  Unrealized Loss		Fair Value		Gross Unrealized  Loss		Fair  Value		Gross Unrealized  Loss
Held-to-maturity:
Obligations of state and political subdivisions	$	1,128	$	7	$	-	$	-	$	1,128	$	7

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Declaration of Dividends

9 Months Ended

Sep. 30, 2013

Declaration of Dividends [Abstract]

Declaration of Dividends

7.Declaration of Dividends

A first quarter dividend of $0.07 per share for holders of common stock of record on March 15, 2013 was declared on January 31, 2013, and was paid on April 1, 2013.  On January 31, 2013, the Company also declared a 1.00% dividend for holders of its Series C preferred stock of record on April 1, 2013, which was paid on April 15, 2013.  On May 22, 2013, the Company declared a second quarter dividend of $0.08 per share for holders of common stock of record on June 14, 2013, and was paid on July 1, 2013.  On May 22, 2013, the Company also declared a 1.00% dividend for holders of its Series C preferred stock of record on July 1, 2013, which was paid on July 15, 2013.  A third quarter dividend was declared on July 24, 2013, in the amount of $0.08 per share for holders of common stock of record on September 16, 2013, payable on October 1, 2013.  On July 24, 2013, the Company also declared a 1.00% dividend for holders of its Series C preferred stock of record on October 1, 2013, payable on October 15, 2013.  On October 16, 2013, the Company declared a fourth quarter dividend of $0.08 per share for holders of common stock of record on December 16, 2013 to be paid on January 2, 2014.  On October 16, 2013, the Company also declared a 1.00% dividend for holders of its Series C preferred stock of record on January 2, 2014, payable on January 15, 2014.

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Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2013

Other Comprehensive Income (Loss) [Abstract]

Component of other comprehensive income (loss)

The following is a summary of the tax effects allocated to each component of other comprehensive income (loss) (in thousands):

	Three Months Ended September 30,
	2013								2012
	Before Tax Amount			Tax Effect		Net of Tax  Amount			Before Tax  Amount			Tax Effect			Net of Tax Amount
Other comprehensive income (loss):
Securities available-for-sale:
Change in unrealized gain during period	$	(95	)	$	33	$	(62	)	$	1,417		$	(496	)	$	921
Reclassification adjustment for gains included in net income		(25	)		9		(16	)		(69	)		24			(45	)
Total other comprehensive income (loss)	$	(120	)	$	42	$	(78	)	$	1,348		$	(472	)	$	876

	Nine Months Ended September 30,
	2013								2012
	Before Tax Amount			Tax Effect		Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount
Other comprehensive income (loss):
Securities available-for-sale:
Change in unrealized gain during period	$	(10,203	)	$	3,571	$	(6,632	)	$	2,725		$	(954	)	$	1,771
Reclassification adjustment for gains included in net income		(229	)		80		(149	)		(204	)		71			(133	)
Total other comprehensive income (loss)	$	(10,432	)	$	3,651	$	(6,781	)	$	2,521		$	(883	)	$	1,638

Reclassification out of accumulated other comprehensive income [Text Block]

The reclassifications out of accumulated other comprehensive income into net income are presented below (in thousands):

	Three Months Ended September 30,
	2013				2012
Details about  Accumulated Other Comprehensive Income Components	Reclassifications Out  of Accumulated Other Comprehensive  Income			Income Statement Line  Item	Reclassifications Out  of Accumulated Other  Comprehensive  Income			Income Statement Line Item
Unrealized gains and losses on securities available-for-sale:
	$	(25	)	Gain on securities, net	$	(69	)	Gain on securities, net
		9		Tax expense		24		Tax expense
	$	(16	)	Net of tax	$	(45	)	Net of tax

	Nine Months Ended September 30,
	2013				2012
Details about  Accumulated Other  Comprehensive Income Components	Reclassifications Out  of Accumulated Other  Comprehensive  Income			Income Statement Line  Item	Reclassifications Out  of Accumulated Other  Comprehensive  Income			Income Statement Line  Item
Unrealized gains and losses on securities available-for-sale:
	$	(229	)	Gain on securities, net	$	(204	)	Gain on securities, net
		80		Tax expense		71		Tax expense
	$	(149	)	Net of tax	$	(133	)	Net of tax

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Other Investments (Tables)

9 Months Ended

Sep. 30, 2013

Other Investments [Abstract]

Components of Other Investments

The aggregate carrying amount of other investments consisted of the following (in thousands):

	September 30, 2013		December 31, 2012
FRB-Atlanta	$	3,789	$	2,258
FHLB-Dallas		2,804		1,862
Other bank stocks		2,063		2,063
Other stocks		187		7
CRA investment		2,108		2,120
	$	10,951	$	8,310

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 08, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	MIDSOUTH BANCORP INC
Entity Central Index Key	0000745981
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		11,255,563
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013

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Credit Quality of Loans and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2013

Credit Quality of Loans and Allowance for Loan Losses [Abstract]

Components of Loans Receivable

The loan portfolio consisted of the following (in thousands):

	September 30, 2013			December 31, 2012
Commercial, financial and agricultural	$	423,073		$	315,655
Lease financing receivable		5,340			5,769
Real estate - construction		76,213			75,334
Real estate - commercial		401,080			414,384
Real estate - residential		142,431			142,858
Installment loans to individuals		94,722			90,561
Other		2,164			2,379
		1,145,023			1,046,940
Less allowance for loan losses		(8,667	)		(7,370	)
	$	1,136,356		$	1,039,570

Allowance for Loan Losses and Recorded Investment in Loans

A rollforward of the activity within the allowance for loan losses by loan type and recorded investment in loans for the nine months ended September 30, 2013 and 2012 is as follows (in thousands):

	September 30, 2013
				Real Estate
	Coml, Fin, and Agric			Construction			Commercial			Residential			Consumer			Finance  Leases  Coml			Other		Total
Allowance for loan losses:
Beginning balance	$	1,535		$	2,147		$	2,166		$	936		$	543		$	41		$	2	$	7,370
Charge-offs		(461	)		-			(18	)		(129	)		(558	)		-			-		(1,166	)
Recoveries		61			5			21			34			92			-			-		213
Provision		3,090			(1,081	)		(661	)		(46	)		962			(16	)		2		2,250
Ending balance	$	4,225		$	1,071		$	1,508		$	795		$	1,039		$	25		$	4	$	8,667
Ending balance:
individually evaluated for impairment	$	419		$	36		$	54		$	55		$	134		$	-		$	-	$	698
Ending balance:
collectively evaluated for impairment	$	3,806		$	1,035		$	1,454		$	740		$	905		$	25		$	4	$	7,969
Loans:
Ending balance	$	423,073		$	76,213		$	401,080		$	142,431		$	94,722		$	5,340		$	2,164	$	1,145,023
Ending balance:
individually evaluated for impairment	$	1,450		$	164		$	2,285		$	994		$	322		$	-		$	-	$	5,215
Ending balance:
collectively evaluated for impairment	$	421,623		$	76,049		$	398,080		$	141,136		$	94,400		$	5,340		$	2,164	$	1,138,792
Ending balance:
loans acquired with deteriorated credit quality	$	-		$	-		$	715		$	301		$	-		$	-		$	-	$	1,016

	September 30, 2012
				Real Estate
	Coml, Fin, and Agric			Construction		Commercial			Residential			Consumer			Finance  Leases Coml		Other		Total
Allowance for loan losses:
Beginning balance	$	1,734		$	1,661	$	2,215		$	936		$	710		$	19	$	1	$	7,276
Charge-offs		(683	)		-		(495	)		(126	)		(395	)		-		-		(1,699	)
Recoveries		169			9		-			3			66			-		-		247
Provision		574			378		282			114			197			4		1		1,550
Ending balance	$	1,794		$	2,048	$	2,002		$	927		$	578		$	23	$	2	$	7,374
Ending balance:
individually evaluated for impairment	$	461		$	40	$	64		$	-		$	95		$	-	$	-	$	660
Ending balance:
collectively evaluated for impairment	$	1,333		$	2,008	$	1,938		$	927		$	483		$	23	$	2	$	6,714
Loans:
Ending balance	$	266,046		$	57,727	$	293,579		$	110,735		$	73,334		$	5,041	$	2,371	$	808,833
Ending balance:
individually evaluated for impairment	$	2,302		$	926	$	3,144		$	1,771		$	299		$	-	$	-	$	8,442
Ending balance:
collectively evaluated for impairment	$	263,744		$	56,801	$	290,435		$	108,964		$	73,035		$	5,041	$	2,371	$	800,391

Age Analysis of Past Due Loans by Class of Loans

An age analysis of past due loans (including both accruing and non-accruing loans) is as follows (in thousands):

	September 30, 2013 (1)
	30-59 Days Past Due		60-89 Days  Past Due		Greater than  90 Days Past  Due		Total Past Due		Current		Total Loans		Recorded  Investment >  90 days and Accruing
Commercial, financial, and agricultural	$	1,934	$	150	$	1,454	$	3,538	$	419,535	$	423,073	$	33
Commercial real estate - construction		58		-		129		187		57,674		57,861		-
Commercial real estate - other		3,815		102		2,903		6,820		394,260		401,080		665
Consumer - credit card		36		3		33		72		5,773		5,845		33
Consumer - other		510		53		325		888		87,989		88,877		13
Residential - construction		-		-		-		-		18,352		18,352		-
Residential - prime		1,968		144		1,064		3,176		139,255		142,431		-
Residential - subprime		-		-		-		-		-		-		-
Other loans		127		4		-		131		2,033		2,164		-
Finance leases commercial		-		-		-		-		5,340		5,340		-
	$	8,448	$	456	$	5,908	$	14,812	$	1,130,211	$	1,145,023	$	744

	December 31, 2012 (1)
	30-59 Days  Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total  Past Due		Current		Total Loans		Recorded  Investment > 90 days and Accruing
Commercial, financial, and agricultural	$	2,220	$	321	$	2,580	$	5,121	$	310,534	$	315,655	$	1,019
Commercial real estate - construction		66		96		101		263		58,087		58,350		-
Commercial real estate - other		4,123		2,108		3,577		9,808		404,576		414,384		952
Consumer - credit card		24		2		15		41		6,766		6,807		15
Consumer - other		421		134		186		741		83,013		83,754		-
Residential - construction		-		-		-		-		16,984		16,984		-
Residential - prime		1,140		239		1,121		2,500		140,358		142,858		-
Residential - subprime		-		-		-		-		-		-		-
Other loans		87		-		-		87		2,292		2,379		-
Finance leases commercial		-		-		-		-		5,769		5,769		-
	$	8,081	$	2,900	$	7,580	$	18,561	$	1,028,379	$	1,046,940	$	1,986

Loans on Nonaccrual Status

Non-accrual loans are as follows (in thousands):

	September 20, 2013 (1)		December 31, 2012 (1)
Commercial, financial, and agricultural	$	1,488	$	1,777
Commercial real estate – construction		166		941
Commercial real estate - other		2,363		3,009
Consumer - credit card		-		-
Consumer - other		352		409
Residential - construction		-		-
Residential - prime		1,391		2,140
Residential - subprime		-		-
Other loans		-		-
Finance leases commercial		-		-
	$	5,760	$	8,276

⁽¹⁾ Balances have been adjusted from previously reported amounts for discounts associated with purchase credit impaired loans.

Impaired Loans by Class of Loans

Loans that are individually evaluated for impairment are as follows (in thousands):

	September 30, 2013
	Recorded  Investment		Unpaid  Principal  Balance		Related Allowance		Average  Recorded  Investment		Interest Income Recognized
With no related allowance recorded:
Commercial, financial, and agricultural	$	423	$	563	$	-	$	520	$	3
Commercial real estate – construction		63		63		-		64		-
Commercial real estate – other		1,921		2,395		-		2,137		6
Consumer – other		74		74		-		67		1
Residential – prime		576		596		-		622		5
Subtotal:	$	3,057	$	3,691	$	-	$	3,410	$	15
With an allowance recorded:
Commercial, financial, and agricultural		1,027		1,141		419		1,029		2
Commercial real estate – construction		101		101		36		149		1
Commercial real estate – other		364		364		54		283		11
Consumer – other		248		248		134		252		1
Residential – prime		418		418		55		387		1
Subtotal:	$	2,158	$	2,272	$	698	$	2,100	$	16
Totals:
Commercial		3,899		4,627		509		4,182		23
Consumer		322		322		134		319		2
Residential		994		1,014		55		1,009		6
Grand total:	$	5,215	$	5,963	$	698	$	5,510	$	31

	December 31, 2012
	Recorded Investment		Unpaid  Principal  Balance		Related  Allowance		Average  Recorded Investment		Interest  Income  Recognized
With no related allowance recorded:
Commercial, financial, and agricultural	$	564	$	675	$	-	$	861	$	5
Commercial real estate – construction		771		770		-		834		1
Commercial real estate – other		2,530		3,059		-		1,780		38
Consumer – other		114		122		-		81		1
Residential – prime		1,575		1,575		-		1,213		26
Subtotal:	$	5,554	$	6,201	$	-	$	4,769	$	71
With an allowance recorded:
Commercial, financial, and agricultural		1,072		1,072		391		1,128		21
Commercial real estate – construction		165		165		57		85		7
Commercial real estate – other		381		381		35		811		3
Consumer – other		216		216		114		228		6
Residential – prime		52		52		30		172		4
Subtotal:	$	1,886	$	1,886	$	627	$	2,424	$	41
Totals:
Commercial		5,483		6,122		483		5,499		75
Consumer		330		338		114		309		7
Residential		1,627		1,627		30		1,385		30
Grand total:	$	7,440	$	8,087	$	627	$	7,193	$	112

Credit Quality Indicators by Class of Loans

The following tables present the classes of loans by risk rating (in thousands):

	September 30, 2013
Commercial Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Commercial, Financial, and Agricultural		Commercial Real Estate Construction		Commercial Real Estate Other		Commercial Total		% of Total Commercial
Pass	$	415,480	$	56,932	$	378,331	$	850,743		96.46	%
Special mention		2,581		-		4,500		7,081		0.80	%
Substandard		4,771		929		18,145		23,845		2.70	%
Doubtful		241		-		104		345		0.04	%
	$	423,073	$	57,861	$	401,080	$	882,014		100.00	%

Residential Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Residential Construction		Residential Prime		Residential Subprime		Residential  Total		% of Total  Residential
Pass	$	18,335	$	138,424	$	-	$	156,759		97.50	%
Special mention		-		727		-		727		0.45	%
Substandard		17		3,280		-		3,297		2.05	%
	$	18,352	$	142,431	$	-	$	160,783		100.00	%

Consumer and Commercial Credit Exposure
Credit Risk Profile Based on Payment Activity
	Consumer  Credit Card		Consumer  Other		Finance Leases  Commercial		Other Loans		Total		% of Total
Performing	$	5,811	$	88,518	$	5,340	$	2,164	$	101,833		99.62	%
Nonperforming		34		359		-		-		393		0.38	%
	$	5,845	$	88,877	$	5,340	$	2,164	$	102,226		100.00	%

	December 31, 2012
Commercial Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Commercial,  Financial, and Agricultural		Commercial  Real Estate  Construction		Commercial  Real Estate  Other		Commercial  Total		% of Total Commercial
Pass	$	304,219	$	54,737	$	396,077	$	755,033		95.76	%
Special Mention		5,748		684		6,224		12,656		1.61	%
Substandard		4,503		2,925		7,514		14,942		1.90	%
Doubtful		1,185		4		4,569		5,758		0.73	%
	$	315,655	$	58,350	$	414,384	$	788,389		100.00	%

Residential Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Residential  Construction		Residential Prime		Residential Subprime		Residential  Total		% of Total  Residential
Pass	$	16,785	$	137,681	$	-	$	154,466		96.64	%
Special mention		-		1,612		-		1,612		1.01	%
Substandard		199		3,565		-		3,764		2.35	%
	$	16,984	$	142,858	$	-	$	159,842		100.00	%

Consumer and Commercial Credit Exposure
Credit Risk Profile Based on Payment Activity
	Consumer Credit Card		Consumer Other		Finance Leases  Commercial		Other Loans		Total		% of Total
Performing	$	6,792	$	83,347	$	5,769	$	2,379	$	98,287		99.57	%
Nonperforming		15		407		-		-		422		0.43	%
	$	6,807	$	83,754	$	5,769	$	2,379	$	98,709		100.00	%

Modifications by Class of Loans

Information about the Company’s TDRs is as follows (in thousands):

	September 30, 2013
	Current		Past Due  Greater than 30 Days		Nonaccrual TDRs		Total TDRs
Commercial, financial, and agricultural	$	23	$	-	$	343	$	366
Real estate - commercial		167		-		-		167
	$	190	$	-	$	343	$	533

	December 31, 2012
	Current		Past Due Greater than  30 Days		Nonaccrual TDRs		Total TDRs
Commercial, financial, and agricultural	$	-	$	-	$	353	$	353
Real estate - commercial		4,709		-		-		4,709
	$	4,709	$	-	$	353	$	5,062