Note 4: Allowance for Loan Losses, Nonperforming Assets and Impaired Loans

The allowance for loan losses methodology incorporates individual evaluation of impaired loans and collective evaluation of groups of non-impaired loans. The Company performs ongoing analysis of the loan portfolio to determine credit quality and to identify impaired loans. Credit quality is rated based on the loan's payment history, the borrower's current financial situation and value of the underlying collateral.

Impaired loans are those loans that have been modified in a troubled debt restructure ("TDR" or "restructure") and larger, non-homogeneous loans that are in nonaccrual or exhibit payment history or financial status that indicate the probability that collection will not occur according to the loan's terms. Generally, impaired loans are given risk ratings that indicate higher risk, such as "classified" or "other assets especially mentioned." Impaired loans are individually evaluated to determine appropriate reserves and are measured at the lower of the invested amount or the fair market value. Impaired loans with an impairment loss are designated nonaccrual. Please refer to Note 1 of the Company's 2012 Form 10-K/A, "Summary of Significant Accounting Policies" for additional information on evaluation of impaired loans and associated specific reserves, and policies regarding nonaccruals, past due status and charge-offs.

Troubled debt restructurings impact the estimation of the appropriate level of the allowance for loan losses. If the restructuring included forgiveness of a portion of principal or accrued interest, the charge-off is included in the historical charge-off rates applied to the collective evaluation methodology. Further, restructured loans are individually evaluated for impairment, with amounts below fair value accrued in the allowance for loan losses. TDRs that experience a payment default are examined to determine whether the default indicates collateral dependency or cash flows below those that were included in the fair value measurement. TDRs, as well as all impaired loans, that are determined to be collateral dependent or for which decreased cash flows indicate a decline in fair value are charged down to fair value.

The Company evaluated characteristics in the loan portfolio and determined major segments and smaller classes within each segment. These characteristics include collateral type, repayment sources, and (if applicable) the borrower's business model. The methodology for calculating reserves for collectively-evaluated loans is applied at the class level.

Portfolio Segments and Classes

During the first quarter of 2013, the Company segregated certain loans that were included within the classes of the Residential Real Estate segment, including Equity lines, Residential closed-end first liens and Residential closed-end junior liens. The newly-segregated loans are secured by residential real estate collateral that is owned by investors and for which the primary repayment source is rental income. The new class in the Residential Real Estate segment allows the Company to address credit risks characteristic of investor-owned residential real estate. Segregating the investor-owned residential real estate did not have a significant impact on the calculation of the allowance for loan losses. Consistent with accounting guidance, prior periods have not been restated and are shown as originally published using the segments and classes in effect for the period.

The segments and classes used in determining the allowance for loan losses, beginning with the first quarter of 2013 are as follows.

Real Estate Construction

Construction, residential

Construction, other

Consumer Real Estate

Equity lines

Residential closed-end first liens

Residential closed-end junior liens

Investor-owned residential real estate

Commercial Real Estate

Multifamily real estate

Commercial real estate, owner occupied

Commercial real estate, other

Commercial Non Real Estate

Commercial and Industrial

Public Sector and IDA

Public sector and IDA

Consumer Non Real Estate

Credit cards

Automobile

Other consumer loans

Historical Loss Rates

The Company's allowance methodology for collectively-evaluated loans applies historical loss rates by class to current class balances as part of the process of determining required reserves. Class loss rates are calculated as the net charge-offs for the class as a percentage of average class balance. The annualized current-year loss rate is averaged with that of prior periods to obtain the historical loss rate. Prior to the first quarter of 2013, one historical loss rate for each class was calculated and applied to current class balance to obtain the allocation for historical loss rates.

Beginning with the first quarter of 2013, two loss rates for each class are calculated: total net charge-offs for the class as a percentage of average class loan balance ("class loss rate"), and total net charge-offs for the class as a percentage of average classified loans in the class ("classified loss rate"). Classified loans are those with risk ratings of "substandard" or higher. Net charge-offs in both calculations include charge-offs and recoveries of classified and non-classified loans as well as those associated with impaired loans. Class historical loss rates are applied to non-classified loan balances at the reporting date, and classified historical loss rates are applied to classified balances at the reporting date.

The revised calculation and application of historical loss rates impacted the calculation of reserves for collectively-evaluated loans. Under the former methodology, the class historical loss rates were applied to all collectively-evaluated loans and would have resulted in a total allocation of $2,712. Under the revised methodology, class historical loss rates are applied to only non-classified loans, resulting in an allocation of $2,624. In addition, the classified historical loss rate resulted in an allocation of $900, for a total allocation based on historical loss rates of $3,524. Consistent with accounting guidance, prior periods have not been restated and are shown as originally published using the methodology in effect for the period.

Risk Factors

In addition to historical loss rates, risk factors pertinent to each class are analyzed to estimate reserves for collectively-evaluated loans. Factors include changes in national and local economic and business conditions, the nature and volume of classes within the portfolio, loan quality and loan officers' experience. Prior to the first quarter of 2013, management also reviewed the Company's lending policies and loan review system to determine whether changes had occurred during the quarter that affected credit risk. Until the first quarter of 2013, no changes were found to affect credit risk and no additional allocations were applied. During the first quarter of 2013, the Company incorporated to the allowance methodology a factor for changes in the Company's lending policies and a factor for changes in the quality of the Company's loan review, and set standard allocations for associated risk. The addition of the factors formalized and standardized a practice already in place and did not have a significant impact on the calculation of the allowance for loan losses.

Factor allocations applied to each class are increased for loans rated special mention and increased to a greater extent for loans rated classified. The Company allocates additional reserves for "high risk" loans, determined to be junior lien mortgages, high loan-to-value loans and interest-only loans.

A detailed analysis showing the allowance roll-forward by portfolio segment and related loan balance by segment follows.

	Activity in the Allowance for Loan Losses for the Three Months Ended March 31, 2013
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated			Total
Balance, December 31, 2012	$	1,070		$	2,263		$	3,442		$	959		$	142		$	424		$	49			$	8,349
Charge-offs		(184	)		(53	)		(35	)		(404	)		---			(78	)		---				(754	)
Recoveries		---			---			---			16			---			9			---				25
Provision for loan losses		287			(364	)		(118	)		705			(32	)		230			(37	)			671
Balance, March 31, 2013	$	1,173		$	1,846		$	3,289		$	1,276		$	110		$	585		$	12			$	8,291

	Activity in the Allowance for Loan Losses for the Three Months Ended March 31, 2012
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated		Total
Balance, December 31, 2011	$	1,079		$	1,245		$	3,515		$	1,473		$	232		$	403		$	121	$	8,068
Charge-offs		---			(95	)		(537	)		---			---			(68	)		---		(700	)
Recoveries		---			---			---			---			---			23			---		23
Provision for loan losses		(405	)		1,102			242			(347	)		(147	)		124			103		672
Balance, March 31, 2012	$	674		$	2,252		$	3,220		$	1,126		$	85		$	482		$	224	$	8,063

	Allowance for Loan Losses as of March 31, 2013
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated			Total
Individually evaluated for impairment		$	---		$	---		$	269		$	1		$	---		$	3		$	---		$	273
Collectively evaluated for impairment			1,173			1,846			3,020			1,275			110			582			12			8,018
Total		$	1,173		$	1,846		$	3,289		$	1,276		$	110		$	585		$	12		$	8,291

	Allowance for Loan Losses as of December 31, 2012
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated			Total
Individually evaluated for impairment		$	---		$	43		$	273		$	231		$	---		$	7		$	---		$	554
Collectively evaluated for impairment			1,070			2,220			3,169			728			142			417			49			7,795
Total		$	1,070		$	2,263		$	3,442		$	959		$	142		$	424		$	49		$	8,349

	Loans as of March 31, 2013
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated			Total
Individually evaluated for impairment		$	6,492		$	478		$	9,927		$	318		$	---		$	43		$	---		$	17,258
Collectively evaluated for impairment			44,356			139,216			284,651			35,160			26,686			28,538			---			558,607
Total loans		$	50,848		$	139,694		$	294,578		$	35,478		$	26,686		$	28,581		$	---		$	575,865

	Loans as of December 31, 2012
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated			Total
Individually evaluated for impairment		$	6,643		$	864		$	10,329		$	574		$	---		$	46		$	---		$	18,456
Collectively evaluated for impairment			43,670			142,398			293,979			36,775			26,169			31,668			---			574,659
Total		$	50,313		$	143,262		$	304,308		$	37,349		$	26,169		$	31,714		$	---		$	593,115

A summary of ratios for the allowance for loan losses follows.

	Three Months Ended March 31,						Year Ended December 31,
	2013			2012			2012
Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees		1.44	%		1.38	%		1.41	%
Ratio of net charge-offs to average loans, net of unearned income and deferred fees(1)		0.50	%		0.46	%		0.49	%

(1)	Net charge-offs are on an annualized basis.

A summary of nonperforming assets follows.

	March 31,						December 31,
	2013			2012			2012
Nonperforming assets:
Nonaccrual loans	$	10,734		$	1,789		$	10,870
Restructured loans in nonaccrual		1,691			3,539			2,151
Total nonperforming loans		12,425			5,328			13,021
Other real estate owned, net		1,094			940			1,435
Total nonperforming assets	$	13,519		$	6,268		$	14,456
Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned		2.35	%		1.07	%		2.44	%
Ratio of allowance for loan losses to nonperforming loans(1)		66.73	%		151.33	%		64.12	%

(1) The Company defines nonperforming loans as nonaccrual loans. Loans 90 days or more past due and still accruing and accruing restructured loans are excluded.

A summary of loans past due 90 days or more and impaired loans follows.

	March 31,						December 31,
	2013			2012			2012
Loans past due 90 days or more and still accruing	$	568		$	210		$	170
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees		0.10	%		0.04	%		0.03	%
Accruing restructured loans	$	5,732		$	3,742		$	2,005
Impaired loans:
Impaired loans with no valuation allowance	$	16,263		$	9,933		$	16,974
Impaired loans with a valuation allowance		995			3,054			1,482
Total impaired loans	$	17,258		$	12,987		$	18,456
Valuation allowance		(273	)		(593	)		(554	)
Impaired loans, net of allowance	$	16,985		$	12,394		$	17,902
Average recorded investment in impaired loans(1)	$	17,935		$	14,555		$	13,540
Interest income recognized on impaired loans, after designation as impaired	$	10		$	24		$	9
Amount of income recognized on a cash basis	$	---		$	---		$	---

(1) Recorded investment includes principal, accrued interest and net deferred fees.

Nonaccrual loans that meet the Company's balance threshold of $250 or are TDRs are designated as impaired. No interest income was recognized on nonaccrual loans for the three months ended March 31, 2013 or March 31, 2012 or for the year ended December 31, 2012.

A detailed analysis of investment in impaired loans, associated reserves and interest income recognized, segregated by loan class follows.

	Impaired Loans as of March 31, 2013
	Principal Balance		(A) Total Recorded Investment(1)		Recorded Investment(1) in (A) for Which There is No Related Allowance		Recorded Investment(1) in (A) for Which There is a Related Allowance		Related Allowance
Real Estate Construction
Construction, residential	$	123	$	118	$	118	$	---	$	---
Construction, other		6,369		6,334		6,334		---		---
Consumer Real Estate
Equity lines		---		---		---		---		---
Residential closed-end first liens		315		315		315		---		---
Residential closed-end junior liens		80		80		80		---		---
Investor-owned residential real estate		83		84		84		---		---
Commercial Real Estate
Multifamily real estate		4,421		4,417		4,417		---		---
Commercial real estate, owner occupied		5,506		5,513		4,587		926		269
Commercial real estate, other		---		---		---		---		---
Commercial Non Real Estate
Commercial and Industrial		318		318		291		27		1
Public Sector and IDA
Public sector and IDA		---		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---		---
Automobile		43		43		---		43		3
Other consumer loans		---		---		---		---		---
Total	$	17,258	$	17,222	$	16,226	$	996	$	273

(1) Recorded investment includes the unpaid principal balance and any accrued interest and net deferred fees.

	Impaired Loans as of December 31, 2012
	Principal Balance		(A) Total Recorded Investment(1)		Recorded Investment(1) in (A) for Which There is No Related Allowance		Recorded Investment(1) in (A) for Which There is a Related Allowance		Related Allowance
Real Estate Construction
Construction, residential	$	123	$	118	$	118	$	---	$	---
Construction, other		6,520		6,487		6,487		---		---

Consumer Real Estate
Equity lines		---		---		---		---		---
Residential closed-end first liens		783		785		634		151		43
Residential closed-end junior liens		81		81		81		---		---

Commercial Real Estate
Multifamily real estate		5,284		5,288		5,288		---		---
Commercial real estate, owner occupied		5,045		5,043		4,293		750		273
Commercial real estate, other		---		---		---		---		---

Commercial Non Real Estate
Commercial and Industrial		574		574		39		535		231

Public Sector and IDA
Public sector and IDA		---		---		---		---		---

Consumer Non Real Estate
Credit cards		---		---		---		---		---
Automobile		46		46		---		46		7
Other consumer loans		---		---		---		---		---
Total	$	18,456	$	18,422	$	16,940	$	1,482	$	554

(1) Recorded investment includes the unpaid principal balance, accrued interest and any accrued interest and deferred fees.

The following tables show the average investment and interest income recognized for impaired loans.

	For the Three Months Ended March 31, 2013
	Average Recorded Investment(1)		Interest Income Recognized
Real Estate Construction
Construction, residential	$	118	$	---
Construction, other		6,486		---
Consumer Real Estate
Equity lines		---		---
Residential closed-end first liens		392		---
Residential closed-end junior liens		142		---
Investor-owned residential real estate		84		---
Commercial Real Estate
Multifamily real estate		4,540		---
Commercial real estate, owner occupied		5,599		10
Commercial real estate, other		---		---
Commercial Non Real Estate
Commercial and Industrial		574		---
Public Sector and IDA
Public sector and IDA		---		---
Consumer Non Real Estate
Credit cards		---		---
Automobile		---		---
Other consumer		---		---
Total	$	17,935	$	10

(1) Recorded investment includes the unpaid principal balance and any accrued interest and net deferred fees.

	Average Investment and Interest Income for Impaired Loans
	For the Year Ended December 31, 2012
	Average Recorded Investment(1)		Interest Income Recognized
Real Estate Construction
Construction, residential	$	1,171	$	---
Construction, other		4,290		1

Commercial Real Estate
Equity lines		101		---
Residential closed-end first liens		873		2
Residential closed-end junior liens		234		---

Commercial Real Estate
Multifamily real estate		1,466		5
Commercial real estate, owner occupied		4,806		1
Commercial real estate, other		---		---

Commercial Non Real Estate
Commercial and Industrial		570		---

Public Sector and IDA
Public sector and IDA		---		---

Consumer Non Real Estate
Credit cards		---		---
Automobile		4		---
Other consumer		25		---
Total	$	13,540	$	9

(1)	Recorded investment includes the unpaid principal balance and any accrued interest and deferred fees.

An analysis of past due and nonaccrual loans as of March 31, 2013 follows.

	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, residential	$	---	$	123	$	---	$	123
Construction, other		30		---		---		2,869
Consumer Real Estate
Equity lines		22		49		49		---
Residential closed-end first liens		1,236		731		414		626
Residential closed-end junior liens		336		170		51		119
Investor-owned residential real estate		196		---		---		3
Commercial Real Estate
Multifamily real estate		943		254		---		4,421
Commercial real estate, owner occupied		670		2,806		---		3,810
Commercial real estate, other		256		---		---		---
Commercial Non Real Estate
Commercial and Industrial		265		258		---		411
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		24		6		6		---
Automobile		185		42		42		43
Other consumer loans		132		6		6		---
Total	$	4,295	$	4,445	$	568	$	12,425

An analysis of past due and nonaccrual loans follows:

December 31, 2012
	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, residential	$	---	$	123	$	---	$	123
Construction, other		31		89		---		3,109

Consumer Real Estate
Equity lines		22		30		30		98
Residential closed-end first liens		1,507		605		126		801
Residential closed-end junior liens		121		39		---		120

Commercial Real Estate
Multifamily real estate		671		261		---		4,624
Commercial real estate, owner occupied		1,113		---		---		3,536
Commercial real estate, other		40		2,089		---		---

Commercial Non Real Estate
Commercial and Industrial		291		505		---		561

Public Sector and IDA
Public sector and IDA		---		---		---		---

Consumer Non Real Estate
Credit cards		20		4		4		---
Automobile		142		10		10		49
Other consumer loans		132		---		---		---
Total	$	4,090	$	3,755	$	170	$	13,021

The estimate of credit risk for non-impaired loans is obtained by applying allocations for internal and external factors. The allocations are increased for loans that exhibit greater credit quality risk.

Credit quality indicators, which the Company terms risk grades, are assigned through the Company's credit review function for larger loans and selective review of loans that fall below credit review thresholds. Loans that do not indicate heightened risk are graded as "pass." Loans that appear to have elevated credit risk because of frequent or persistent past due status, which is less than 75 days, or that show weakness in the borrower's financial condition are risk graded "special mention." Loans with frequent or persistent delinquency exceeding 75 days or that have a higher level of weakness in the borrower's financial condition are graded "classified." Classified loans have regulatory risk ratings of "substandard" and "doubtful." Allocations are increased by 50% and by 100% for loans with grades of "special mention" and "classified," respectively.

Determination of risk grades was completed for the portfolio as of March 31, 2013 and 2012 and December 31, 2012.

The following displays collectively-evaluated loans by credit quality indicator.

March 31, 2013
	Pass		Special Mention		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	15,993	$	158	$	---
Construction, other		28,154		6,086		30
Consumer Real Estate
Equity lines		17,462		---		84
Closed-end first liens		75,434		283		2,739
Closed-end junior liens		5,410		116		143
Investor-owned residential real estate		37,027		48		48
Commercial Real Estate
Multifamily residential real estate		35,328		---		1,178
Commercial real estate owner-occupied		144,248		215		1,239
Commercial real estate other		93,264		3,092		---
Commercial Non Real Estate
Commercial and Industrial		34,725		151		298
Public Sector and IDA
States and political subdivisions		26,686		---		---
Consumer Non Real Estate
Credit cards		6,292		---		---
Automobile		12,171		122		115
Other consumer		9,269		24		68
Total	$	541,463	$	10,295	$	5,942

The following displays collectively-evaluated loans by credit quality indicator.

December 31, 2012
	Pass		Special Mention		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	14,344	$	158	$	---
Construction, other		29,011		---		120

Consumer Real Estate
Equity lines		17,742		100		182
Closed-end first liens		113,893		652		2,413
Closed-end junior liens		6,713		119		138

Commercial Real Estate
Multifamily residential real estate		36,421		---		324
Commercial real estate owner-occupied		160,188		253		1,079
Commercial real estate other		92,628		3,112		---

Commercial Non Real Estate
Commercial and Industrial		36,372		99		318

Public Sector and IDA
States and political subdivisions		26,170		---		---

Consumer Non Real Estate
Credit cards		6,690		---		---
Automobile		12,344		101		56
Other consumer		11,815		45		105
Total	$	564,331	$	4,639	$	4,735

Sales, Purchases and Reclassification of Loans

The Company finances mortgages under "best efforts" contracts with mortgage purchasers. The mortgages are designated as held for sale upon initiation. There have been no major reclassifications from portfolio loans to held for sale. Occasionally, the Company purchases or sells participations in loans. All participation loans purchased met the Company's normal underwriting standards at the time the participation was entered. Participation loans are included in the appropriate portfolio balances to which the allowance methodology is applied.

Troubled Debt Restructurings

The Company modified loans in troubled debt restructurings during the periods ended March 31, 2013 and March 31, 2012. The following tables present restructurings by class that occurred during the periods.

Note: Only classes with restructured loans are presented.

	Restructurings That Occurred During the Three Months Ended March 31, 2013
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance
Real Estate Construction
Construction, other		1	$	3,500	$	3,500
Commercial Real Estate
Commercial real estate, owner occupied		1		154		239
Total		2	$	3,654	$	3,739

	Restructurings that occurred during the Three Months Ended March 31, 2012
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance		Impairment Accrued
Consumer Real Estate
Closed-end first liens		3	$	305	$	324	$	47
Closed-end junior liens		1		143		147		109
Commercial Real Estate
Commercial real estate, owner occupied		1		17		22		---
Total		5	$	465	$	493	$	156

Troubled debt restructurings totaled $7,423, with specific allocations of $1 as of March 31, 2013. At March 31, 2012, total restructured loans amounted to $7,281 with specific allocations of $289.

The troubled debt restructurings during the first three months of 2013 provided payment relief to the borrowers without forgiveness of principal or accrued interest. The interest-only period on one loan was extended beyond the contract date specified to begin amortization. On the other loan, the modification included an extended term, lower interest rate and new funds for debt consolidation to allow the borrower increased debt service ability. As troubled debt restructurings, the loans were individually evaluated under ASC 310. The impairment analysis was based upon the fair value of collateral for the construction loan and upon the present value of cash flows for the commercial real estate loan. The fair value measurements indicated fair values in excess of the loan balances and neither measurement resulted in a specific allocation.

The modifications during the first three months of 2012 provided payment relief primarily by extending maturity dates without reducing interest rates or amounts owed. Of the consumer real estate loans modified during the first quarter of 2012, two were loans previously modified and reported as troubled debt restructurings in prior quarters. The Company granted additional modifications in the first quarter of 2012, increasing the balance by $10 from December 31, 2011. The loans are secured by real estate and the impairment measurement is based upon the fair value (reduced by selling costs) of the underlying collateral. The impairment measurement of the TDRs modified during the first three months of 2012 resulted in $156 accrued to the allowance for loan losses.

The following tables present restructured loans that defaulted during the three-month periods ended March 31, 2013 and March 31, 2012 and that were modified within 12 months prior to default. The company defines default as one or more payments that occur more than 90 days past the due date, or charge-offs after the date of restructuring.

	Restructured Loans That Defaulted During the Three Months Ended March 31, 2013 That Were Modified Within 12 Months Prior to Default
	Number of Contracts	Principal Balance
Consumer Real Estate
Residential closed-end first liens	1	$	101
Residential closed-end junior liens	1		88
Commercial Real Estate
Commercial real estate owner-occupied	1		663
Commercial Non Real Estate
Commercial and industrial	1		219
Total	4	$	1,071

	Restructured Loans That Defaulted During the Three Months Ended March 31, 2012 That Were Modified Within 12 Months Prior to Default
	Number of Contracts	Principal Balance
Consumer Real Estate
Closed-end first liens	1	$	17
Commercial Real Estate
Multifamily	1		250
Commercial Non Real Estate
Commercial and industrial	1		58
Consumer Non Real Estate
Other consumer	1		67
Total	4	$	392

Restructured loans are individually evaluated for impairment. The fair value measurements for all of the restructured loans that experienced default during the three months ended March 31, 2013 and March 31, 2012 were based on the fair value of collateral and as such, were not significantly affected by the payment default. All of the above loans are in nonaccrual status.