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

6 Months Ended

Jun. 30, 2013

Disclosure Text Block Supplement [Abstract]

Allowance for Credit Losses [Text Block]

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 2 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

Beginning January 1, 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 in 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 $2,695. Under the revised methodology, class historical loss rates are applied to only non-classified loans, resulting in an allocation of $2,687. In addition, the classified historical loss rate resulted in an allocation of $838, for a total allocation based on historical loss rates of $3,525. 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.

The analysis of certain factors results in standard allocations to all segments and classes. These factors include loan officers’ average years of experience, the risk from changes in lending policies, and the risk from changes in loan review. Factors analyzed for each class, with resultant allocations based upon the level of risk assessed for each class, include levels of past due loans, nonaccrual loans, current class balance as a percentage of total loans, and the percentage of high risk loans within the class. Additionally, factors specific to each segment are analyzed and result in allocations to the segment.

Real estate construction loans are subject to general risks from changing commercial building and housing market trends and economic conditions that may impact demand for completed properties and the costs of completion. These risks are measured by market-area unemployment rates, bankruptcy rates, housing and commercial building market trends, and interest rates.

The credit quality of consumer real estate is subject to risks associated with the borrower’s repayment ability and collateral value, measured generally by analyzing local unemployment and bankruptcy trends, local housing market trends, and interest rates.

The commercial real estate segment includes loans secured by multifamily residential real estate, commercial real estate occupied by the owner/borrower, and commercial real estate leased to non-owners. Loans in the commercial real estate segment are impacted by economic risks from changing commercial real estate markets, rental markets for multi-family housing and commercial buildings, business bankruptcy rates, local unemployment and interest rate trends that would impact the businesses housed by the commercial real estate.

Commercial non real estate loans are secured by collateral other than real estate, or are unsecured. Credit risk for commercial non real estate loans is subject to economic conditions, generally monitored by local business bankruptcy trends, and interest rates. Public sector and IDA loans are extended to municipalities and related entities. Credit risk is based upon the entity’s ability to repay and interest rate trends.

Consumer non real estate includes credit cards, automobile and other consumer loans. Credit cards and certain other consumer loans are unsecured, while collateral is obtained for automobile loans and other consumer loans. Credit risk stems primarily from the borrower’s ability to repay, measured by average unemployment, average personal bankruptcy rates and interest rates.

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 June 30, 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, March 31, 2012	$	1,173		$	1,846		$	3,289		$	1,276		$	110	$	585		$	12	$	8,291
Charge-offs		---			(46	)		---			(556	)		---		(128	)		---		(730	)
Recoveries		---			1			4			---			---		31			---		36
Provision for loan losses		(141	)		(131	)		(264	)		761			1		25			104		355
Balance, June 30, 2013	$	1,032		$	1,670		$	3,029		$	1,481		$	111	$	513		$	116	$	7,952

	Activity in the Allowance for Loan Losses for the Six Months Ended June 30, 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	)		(99	)		(35	)		(960	)		---			(206	)		---		(1,484	)
Recoveries		---			1			4			16			---			40			---		61
Provision for loan losses		146			(495	)		(382	)		1,466			(31	)		255			67		1,026
Balance, June 30, 2013	$	1,032		$	1,670		$	3,029		$	1,481		$	111		$	513		$	116	$	7,952

	Activity in the Allowance for Loan Losses for the Three Months Ended June 30, 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, March 31, 2012	$	674		$	2,252		$	3,220		$	1,126		$	85	$	482		$	224			8,063
Charge-offs		(589	)		(150	)		(200	)		(5	)		---		(84	)		---			(1,028	)
Recoveries		13			2			---			5			---		13			---			29
Provision for loan losses		1,298			(194	)		237			(213	)		26		11			(61	)		1,104
Balance, June 30, 2012	$	1,396		$	1,910		$	3,257		$	909		$	111	$	422		$	163		$	8,168

	Activity in the Allowance for Loan Losses for the Six Months Ended June 30, 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		(589	)		(245	)		(737	)		(5	)		---			(152	)		---		(1,728	)
Recoveries		13			2			---			1			---			36			---		52
Provision for loan losses		893			908			479			(560	)		(121	)		135			42		1,776
Balance, June 30, 2012	$	1,396		$	1,910		$	3,257		$	909		$	111		$	422		$	163	$	8,168

	Allowance for Loan Losses as of June 30, 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	$	---	$	10	$	261	$	1	$	---	$	1	$	---	$	273
Collectively evaluated for impairment		1,032		1,660		2,768		1,480		111		512		116		7,679
Total	$	1,032	$	1,670	$	3,029	$	1,481	$	111	$	513	$	116	$	7,952

	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 June 30, 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	$	2,992	$	915	$	13,227	$	236	$	---	$	25	$	---	$	17,395
Collectively evaluated for impairment		53,314		140,982		286,835		34,821		26,306		29,311		---		571,569
Total loans	$	56,306	$	141,897	$	300,062	$	35,057	$	26,306	$	29,336	$	---	$	588,964

	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.

	Six Months Ended June 30,						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		1.35	%		1.39	%		1.41	%
Ratio of net charge-offs to average loans, net of unearned income and deferred fees(1)		0.49	%		0.57	%		0.49	%

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

A summary of nonperforming assets follows.

	June 30,						December 31,
	2013			2012			2012
Nonperforming assets:
Nonaccrual loans	$	10,428		$	3,627		$	10,870
Restructured loans in nonaccrual		1,522			3,763			2,151
Total nonperforming loans		11,950			7,390			13,021
Other real estate owned, net		969			871			1,435
Total nonperforming assets	$	12,919		$	8,261		$	14,456
Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned		2.19	%		1.41	%		2.44	%
Ratio of allowance for loan losses to nonperforming loans(1)		66.54	%		110.53	%		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.

	June 30,						December 31,
	2013			2012			2012
Loans past due 90 days or more and still accruing	$	125		$	242		$	170
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees		0.02	%		0.04	%		0.03	%
Accruing restructured loans	$	6,234		$	2,035		$	2,005
Impaired loans:
Impaired loans with no valuation allowance	$	15,946		$	12,374		$	16,974
Impaired loans with a valuation allowance		1,449			1,543			1,482
Total impaired loans	$	17,395		$	13,917		$	18,456
Valuation allowance		(273	)		(362	)		(554	)
Impaired loans, net of allowance	$	17,122		$	13,555		$	17,902
Average recorded investment in impaired loans(1)	$	17,889		$	14,055		$	13,540
Interest income recognized on impaired loans, after designation as impaired	$	77		$	186		$	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 six months ended June 30, 2013 or June 30, 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 June 30, 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		2,869		2,854		2,854		---		---
Consumer Real Estate
Equity lines		---		---		---		---		---
Residential closed-end first liens		506		507		291		216		3
Residential closed-end junior liens		327		328		61		268		7
Investor-owned residential real estate		82		83		83		---		---
Commercial Real Estate
Multifamily real estate		4,261		4,258		4,258		---		---
Commercial real estate, owner-occupied		5,466		5,469		4,553		916		261
Commercial real estate, other		3,500		3,516		3,516		---		---
Commercial Non Real Estate
Commercial and Industrial		236		237		213		23		1
Public Sector and IDA
Public sector and IDA		---		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---		---
Automobile		25		25		---		25		1
Other consumer loans		---		---		---		---		---
Total	$	17,395	$	17,395	$	15,947	$	1,448	$	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.

	Average Investment and Interest Income for Impaired Loans
	For the Three Months Ended June 30, 2013				For the Six Months Ended June 30, 2013
	Average Recorded Investment(1)		Interest Income Recognized		Average Recorded Investment(1)		Interest Income Recognized
Real Estate Construction
Construction, residential	$	118	$	---	$	118	$	---
Construction, other		2,854		---		2,927		---
Consumer Real Estate
Equity lines		---		---		---		---
Residential closed-end first liens		530		1		534		2
Residential closed-end junior liens		347		---		352		---
Investor-owned residential real estate		83		1		84		3
Commercial Real Estate
Multifamily real estate		4,294		---		4,383		---
Commercial real estate, owner-occupied		5,486		28		5,509		55
Commercial real estate, other		3,516		8		3,516		16
Commercial Non Real Estate
Commercial and industrial		310		1		429		1
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		---		---		---		---
Automobile		29		---		37		---
Other consumer		---		---		---		---
Total	$	17,567	$	39	$	17,889	$	77

⁽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
Consumer 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.

The Company reviews nonaccrual loans on an individual loan basis to determine whether future payments are reasonably assured. To satisfy this criteria, the Company’s evaluation must determine that the underlying cause of the original delinquency or weakness that indicated nonaccrual status has been resolved, such as receipt of new guarantees, increased cash flows that cover the debt service or other resolution. Nonaccrual loans that demonstrate reasonable assurance of future payments and that have made at least six consecutive payments in accordance with repayment terms and timeframes may be returned to accrual status.

A restructured loan for which impairment measurement does not indicate a loss and that maintains current status for at least six months may be returned to accrual status.

An analysis of past due and nonaccrual loans as of June 30, 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		---		2,869		---		2,869
Consumer Real Estate
Equity lines		---		30		---		30
Residential closed-end first liens		1,128		346		104		503
Residential closed-end junior liens		16		99		---		99
Investor-owned residential real estate		410		---		---		3
Commercial Real Estate
Multifamily real estate		664		3,563		---		4,261
Commercial real estate, owner-occupied		468		2,771		18		3,728
Commercial real estate, other		73		---		---		---
Commercial Non Real Estate
Commercial and Industrial		150		309		---		309
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		2		3		3		---
Automobile		189		25		---		25
Other consumer loans		45		---		---		---
Total	$	3,145	$	10,138	$	125	$	11,950

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 June 30, 2013 and 2012 and December 31, 2012.

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

June 30, 2013

	Pass		Special Mention		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	18,575	$	157	$	---
Construction, other		34,528		---		30
Consumer Real Estate
Equity lines		16,886		---		64
Closed-end first liens		76,218		1,300		2,229
Closed-end junior liens		4,690		119		129
Investor-owned residential real estate		38,543		321		50
Commercial Real Estate
Multifamily residential real estate		50,590		---		1,065
Commercial real estate owner-occupied		136,791		2,208		1,014
Commercial real estate other		92,055		3,112		---
Commercial Non Real Estate
Commercial and Industrial		33,740		848		249
Public Sector and IDA
States and political subdivisions		26,308		---		---
Consumer Non Real Estate
Credit cards		6,575		---		---
Automobile		11,858		139		64
Other consumer		10,140		42		29
Total	$	557,497	$	8,246	$	4,923

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 modifies loans in troubled debt restructurings. Total troubled debt restructurings amounted to $7,756 at June 30, 2013, $4,246 at December 31, 2012, and $5,798 at June 30, 2012. The following tables present restructurings by class that occurred during three and six month periods ended June 30, 2013, and the three and six month periods ended June 30, 2012.

Note: Only classes with restructured loans are presented.

	Restructurings That Occurred During the Three Months Ended June 30, 2013
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	212	$	216	$	3
Residential closed-end junior liens		1		262		267		7
Total		2	$	474	$	483	$	10

	Restructurings That Occurred During the Six Months Ended June 30, 2013
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	212	$	216	$	3
Residential closed-end junior liens		1		262		267		7
Commercial Real Estate
Commercial real estate, owner-occupied		1		154		239		---
Commercial real estate, other		1		3,500		3,500		---
Total		4	$	4,128	$	4,222	$	10

The modifications that resulted in troubled debt restructurings between January 1, 2013 and June 30, 2013 provided payment relief to the borrowers without forgiveness of principal or accrued interest. The date of conversion from interest-only to amortizing payments for one commercial real estate loan was extended beyond the date specified by the contract, resulting in designation as a troubled debt restructuring. During the second quarter of 2013, the loan was converted to amortizing payments and moved from Real Estate Construction to Commercial Real Estate. The other commercial real estate loan was modified to extend the term, lower the interest rate and provide debt consolidation to allow the borrower increased debt service ability. The modifications of the consumer real estate loans capitalized accrued interest and reduced interest rates. The term for one consumer real estate loan was shortened, resulting in a higher payment, while the term for the other consumer real estate loan was lengthened, resulting in a lower payment.

	Restructurings That Occurred During the Three Months Ended June 30, 2012
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		2	$	201	$	146	$	---
Residential closed-end junior liens		1		147		93		---
Commercial Real Estate
Commercial real estate, owner-occupied		1		680		680		21
Commercial Non Real Estate
Commercial and industrial		1		400		400		176
Total		5	$	1,428	$	1,319	$	197

	Restructurings That Occurred During the Six Months Ended June 30, 2012
	Number of Contracts		Pre-Modification Outstanding Principal Balance		Post-Modification Outstanding Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		4	$	351	$	310	$	47
Residential closed-end junior liens		1		147		93		---
Commercial Real Estate
Commercial real estate, owner-occupied		2		697		702		21
Commercial Non Real Estate
Commercial and industrial		1		400		400		176
Total		8	$	1,595	$	1,505	$	244

The troubled debt restructurings for the three months ended June 30, 2012 included partial charge offs of $109 for two consumer real estate loans that had received modifications in previous quarters; providing payment relief for one commercial real estate loan and one commercial non real estate loan, primarily by extending maturity dates or changing amortization structures without reducing interest rates or amounts owed; and adding a co-borrower to one consumer real estate loan. Loans restructured during the first quarter of 2012 were modified to provide payment relief without reducing interest rates or amounts owed. Restructured loans are designated impaired and measured for impairment. Collateral dependent restructured loans are measured using the fair value of collateral. Non-collateral dependent restructured loans are measured using the present value of cash flows. The impairment measurement resulted in specific allocations of $197 for loans modified during the three months ended June 30, 2012 and $244 for loans modified during the six months ended June 30, 2012.

The following tables present restructured loans that defaulted during the three and six month periods ended June 30, 2013 and the three and six month periods ended June 30, 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 And Were Modified Within 12 Months Prior to Default
	Default During the 3 Month Period Ended June 30, 2013						Default During the 6 Month Period Ended June 30, 2013
	Number of Contracts		Principal Balance		Impairment Accrued		Number of Contracts		Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		1	$	74	$	---		1	$	74	$	---
Residential closed-end junior liens		1		60		---		1		60		---
Commercial Real Estate
Commercial real estate owner-occupied		2		670		---		3		863		---
Commercial Non Real Estate
Commercial and industrial		1		137		---		1		137		---
Total		5	$	941	$	---		6	$	1,134	$	---

	Restructured Loans That Defaulted And Were Modified Within 12 Months Prior to Default
	Default During the 3 Month Period Ended June 30, 2012						Default During the 6 Month Period Ended June 30, 2012
	Number of Contracts		Principal Balance		Impairment Accrued		Number of Contracts		Principal Balance		Impairment Accrued
Consumer Real Estate
Residential closed-end first liens		2	$	123	$	---		2	$	123	$	---
Residential closed-end junior liens		1		93		---		1		93		---
Commercial Real Estate
Commercial real estate owner-occupied		1		675		21		1		675		21
Commercial Non Real Estate
Commercial and industrial		-		-		-		-		-		-
Total		4	$	891	$	21		4	$	891	$	21

Restructured loans are individually evaluated for impairment. The fair value measurements for all of the restructured loans presented above were based on the fair value of collateral and as such, were not significantly affected by the payment default. All but one of the restructured loans above are in nonaccrual status. One of the commercial real estate loans that defaulted in the first quarter of 2013 was placed into other real estate owned during the first quarter of 2013.