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, 2012

OR

¨ 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 000-22062

UWHARRIE CAPITAL CORP

(Exact name of registrant as specified in its charter)

NORTH CAROLINA	56-1814206
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)
132 NORTH FIRST STREET
ALBEMARLE, NORTH CAROLINA	28001
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone number, including area code: (704) 983-6181

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark 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.    x  Yes    ¨  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 smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 7,522,902 shares of common stock outstanding as of November 5, 2012.

Table of Contents

		Page No.
Part I.	FINANCIAL INFORMATION
Item 1 -	Financial Statements (Unaudited)
	Consolidated Balance Sheets September 30, 2012 and December 31, 2011		3
	Consolidated Statements of Income for the Three and Nine Months Ended September, 2012 and 2011		4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2011		5
	Consolidated Statements of Changes in Shareholders’ Equity Nine Months Ended September 30, 2012		6
	Consolidated Statements of Cash Flows Nine Months Ended September 30, 2012 and 2011		7
	Notes to Consolidated Financial Statements		8
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3 -	Quantitative and Qualitative Disclosures about Market Risk		34
Item 4 -	Controls and Procedures		35
Part II.	OTHER INFORMATION
Item 1 -	Legal Proceedings		35
Item 1A -	Risk Factors		35
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3 -	Defaults Upon Senior Securities		36
Item 4 -	Mine Safety Disclosures		36
Item 5 -	Other Information		36
Item 6 -	Exhibits		37
	Exhibit Index		40

-2-

Uwharrie Capital Corp and Subsidiaries

Consolidated Balance Sheets

Part I. FINANCIAL INFORMATION

Item 1 - Financial Statements

	September 30,
	2012			December 31,
	(Unaudited)			2011*
	(dollars in thousands)
ASSETS
Cash and due from banks	$	6,766		$	7,487
Interest-earning deposits with banks		19,431			21,200
Securities available for sale, at fair value		130,274			88,661
Loans held for sale		1,025			1,958
Loans:
Loans held for investment		339,343			366,675
Less allowance for loan losses		(6,883	)		(6,815	)
Net loans held for investment		332,460			359,860
Premises and equipment, net		14,968			15,076
Interest receivable		1,935			2,084
Restricted stock		2,265			3,289
Bank owned life insurance		6,354			6,171
Goodwill		987			987
Other real estate owned		8,947			10,258
Prepaid assets		928			1,347
Other assets		8,563			8,524
Total assets	$	534,903		$	526,902
LIABILITIES
Deposits:
Demand noninterest-bearing	$	66,630		$	62,339
Interest checking and money market accounts		203,098			185,539
Savings deposits		43,392			39,273
Time deposits, $100,000 and over		55,746			58,274
Other time deposits		81,534			85,913
Total deposits		450,400			431,338
Short-term borrowed funds		20,635			20,791
Long-term debt		12,676			25,233
Interest payable		277			301
Other liabilities		4,509			3,636
Total liabilities		488,497			481,299
Off balance sheet items, commitments and contingencies (Note 8)
SHAREHOLDERS’ EQUITY
Preferred stock, no par value: 10,000,000 shares authorized;
10,000 shares of series A issued and outstanding		10,000			10,000
500 shares of series B issued and outstanding		500			500
Discount on preferred stock		(125	)		(200	)
Common stock, $1.25 par value: 20,000,000 shares authorized; issued and outstanding
7,522,902 and 7,593,929 shares, respectively		9,404			9,492
Additional paid-in capital plus stock option surplus		13,828			14,010
Unearned ESOP compensation		(883	)		(772	)
Undivided profits		11,258			10,379
Accumulated other comprehensive income		2,424			2,194
Total shareholders’ equity		46,406			45,603
Total liabilities and shareholders’ equity	$	534,903		$	526,902

(*) Derived from audited consolidated financial statements

See accompanying notes

-3-

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Income (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(in thousands, except share and per share data)
Interest Income
Loans, including fees	$	4,809		$	5,499		$	14,957		$	16,258
Investment securities
US Treasury		145			152			432			594
US Government agencies and corporations		375			294			768			796
State and political subdivisions		75			92			255			279
Interest-earning deposits with banks and federal funds sold		29			21			101			39
Total interest income		5,433			6,058			16,513			17,966
Interest Expense
Interest checking and money market accounts		129			202			414			645
Savings deposits		49			82			154			246
Time deposits, $100,000 and over		195			278			610			844
Other time deposits		250			282			770			883
Short-term borrowed funds		98			89			253			271
Long-term debt		180			259			621			807
Total interest expense		901			1,192			2,822			3,696
Net interest income		4,532			4,866			13,691			14,270
Provision for loan losses		391			483			1,094			2,012
Net interest income after provision for loan losses		4,141			4,383			12,597			12,258
Noninterest Income
Service charges on deposit accounts		450			476			1,318			1,369
Other service fees and commissions		801			885			2,392			2,651
Gain (loss) on sale of securities		—			—			16			933
Gain (loss) on fixed assets and other assets		(80	)		(51	)		216			(56	)
Income from mortgage loan sales		1,102			407			2,578			1,121
Other income		107			82			345			287
Total noninterest income		2,380			1,799			6,865			6,305
Noninterest Expense
Salaries and employee benefits		3,215			3,071			9,478			9,166
Net occupancy expense		293			305			863			888
Equipment expense		185			179			556			579
Data processing costs		204			213			638			630
Office supplies and printing		93			76			245			247
Foreclosed real estate expense		547			355			1,357			480
Professional fees and services		295			414			467			1,160
Marketing and donations		146			127			484			424
Electronic banking expense		227			228			681			656
Software amortization and maintenance		140			145			423			421
FDIC insurance		173			171			518			575
Other noninterest expense		632			594			1,828			1,757
Total noninterest expense		6,150			5,878			17,538			16,983
Income before income taxes		371			304			1,924			1,580
Income taxes		109			49			561			407
Net income	$	262		$	255		$	1,363		$	1,173
Net Income	$	262			255			1,363			1,173
Dividends – preferred stock		(161	)		(161	)		(484	)		(484	)
Net income available to common shareholders	$	101		$	94		$	879		$	689
Net income per common share
Basic	$	0.01		$	0.01		$	0.12		$	0.09
Diluted	$	0.01		$	0.01		$	0.12		$	0.09
Weighted average shares outstanding
Basic		7,354,468			7,464,970			7,397,130			7,472,411
Diluted		7,354,468			7,464,970			7,397,130			7,472,411

See accompanying notes

-4-

UWHARRIE CAPITAL CORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(in thousands)
Net Income	$	262		$	255		$	1,363		$	1,173
Other comprehensive income
Unrealized gain on available for sale securities		414			2,332			366			3,477
Related tax effect		(143	)		(808	)		(126	)		(1,234	)
Reclassification of (gain) loss recognized in net income		—			—			(16	)		(933	)
Related tax effect		—			—			6			360
Total other comprehensive income		271			1,524			230			1,670
Comprehensive income	$	533		$	1,779		$	1,593		$	2,843

See accompanying notes

-5-

Uwharrie Capital Corp and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

	Number of																						Accumulated
	Common			Preferred		Preferred		Discount on						Additional			Unearned						Other
	Shares			Stock		Stock		Preferred			Common			Paid-in			ESOP			Undivided			Comprehensive
	Issued			Series A		Series B		Stock			Stock			Capital			Compensation			Profits			Income (Loss)		Total
	(in thousands, except share data)
Balance, December 31, 2011		7,593,929		$	10,000	$	500	$	(200	)	$	9,492		$	14,010		$	(772	)	$	10,379		$	2,194	$	45,603
Net income		—			—		—		—			—			—			—			1,363			—		1,363
Repurchase of common stock		(69,854	)		—		—		—			(87	)		(156	)		—			—			—		(243	)
Retirement of common stock		(1,173	)		—		—		—			(1	)		1			—			—			—		—
Other comprehensive income		—			—		—		—			—			—			—			—			230		230
Release of ESOP shares		—			—		—		—			—			(30	)		65			—			—		35
Increase in ESOP notes receivable		—			—		—		—			—			—			(176	)		—			—		(176	)
Stock compensation expense		—			—		—		—			—			3			—			—			—		3
Record preferred stock dividend and discount accretion		—			—		—		75			—			—			—			(484	)		—		(409	)
Balance, September 30, 2012		7,522,902		$	10,000	$	500	$	(125	)	$	9,404		$	13,828		$	(883	)	$	11,258		$	2,424	$	46,406

See accompanying notes

-6-

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended
	September 30,
	2012			2011
	(dollars in thousands)
Cash flows from operating activities
Net income	$	1,363		$	1,173
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation		718			615
Net amortization of security premiums/discounts		907			603
Net amortization of mortgage servicing rights		609			416
Impairment of foreclosed real estate		988			31
Impairment of other assets		50			—
Provision for loan losses		1,094			2,012
Stock compensation		3			4
Net realized gain on sales / calls of available for sale securities		(16	)		(933	)
Income from mortgage loan sales		(2,578	)		(1,121	)
Proceeds from sales of loans held for sale		89,969			42,793
Origination of loans held for sale		(86,458	)		(37,173	)
(Gain) loss on sale of premises, equipment and other assets		(276	)		13
Increase in cash surrender value of life insurance		(183	)		(144	)
Loss on sales of foreclosed real estate		60			43
Release of ESOP shares		35			60
Net change in interest receivable		149			490
Net change in other assets		137			(751	)
Net change in interest payable		(24	)		(35	)
Net change in other liabilities		873			619
Net cash provided by operating activities		7,420			8,715
Cash flows from investing activities
Proceeds from sales, maturities and calls of securities available for sale		19,215			35,497
Purchase of securities available for sale		(61,369	)		(28,020	)
Net change in loans		24,845			(3,999	)
Purchase of premises and equipment		(610	)		(1,147	)
Proceeds from sales of foreclosed real estate		1,724			577
Investment in other assets		(260	)		(185	)
Net decrease in restricted stock		1,024			511
Net cash provided by investing activities		(15,431	)		3,234
Cash flows from financing activities
Net increase (decrease) in deposit accounts		19,062			(9,864	)
Net increase (decrease) in short-term borrowed funds		(156	)		9,598
Net decrease in long-term debt		(12,557	)		(11,533	)
Proceeds from issuance of new junior subordinated debt		—			4,438
Repayment of junior subordinated debt		—			(730	)
Repurchase of common stock		(243	)		—
Increase in unearned ESOP compensation		(176	)		(94	)
Dividends on preferred stock		(409	)		(409	)
Net cash used in financing activities		5,521			(8,594	)
Increase (decrease) in cash and cash equivalents		(2,490	)		3,355
Cash and cash equivalents, beginning of period		28,687			13,624
Cash and cash equivalents, end of period	$	26,197		$	16,979
Supplemental Disclosures of Cash Flow Information
Interest paid	$	2,846		$	3,731
Income taxes paid		78			216
Supplemental Schedule of Non-Cash Activities
Net change in fair-value of securities available for sale, net of tax		230			7,527
Loans transferred to foreclosed real estate		1,649			1,670
Company financed sales of other real estate owned		(188	)		—

See accompanying notes

-7-

UWHARRIE CAPITAL CORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 1 - Basis of Presentation

The financial statements and accompanying notes are presented on a consolidated basis including Uwharrie Capital Corp (the “Company”) and its subsidiaries, Bank of Stanly (“Stanly”), Anson Bank & Trust Co. (“Anson”), Cabarrus Bank & Trust Company (“Cabarrus”), Strategic Investment Advisors, Inc. (“SIA”), and Uwharrie Mortgage Inc. Stanly consolidates its subsidiaries, the Strategic Alliance Corporation, BOS Agency, Inc. and Gateway Mortgage, Inc., each of which is wholly-owned by Stanly.

The information contained in the consolidated financial statements is unaudited. In the opinion of management, the consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) and material adjustments necessary for a fair presentation of results of interim periods, all of which are of a normal recurring nature, have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for an entire year. Management is not aware of economic events, outside influences or changes in concentrations of business that would require additional clarification or disclosure in the consolidated financial statements.

The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to consolidated financial statements filed as part of the Company’s 2011 Annual Report on Form 10-K. This Quarterly Report should be read in conjunction with such Annual Report.

Note 2 – Comprehensive Income

The Company reports as comprehensive income all changes in shareholders’ equity during the year from sources other than shareholders. Other comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. The Company’s only component of other comprehensive income is unrealized gains and losses, net of income tax, on investment securities available for sale.

Note 3 – Per Share Data

Basic and diluted net income per common share is computed based on the weighted average number of shares outstanding during each period after retroactively adjusting for stock dividends. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income of the Company. For the nine months ended September 30, 2012, the Company’s 122,341 stock options outstanding did not have a dilutive effect on per share results because the exercise prices exceeded the share values for each period. The Company had 123,570 stock options outstanding at September 30, 2011 and they did not have a dilutive effect.

-8-

Basic and diluted net income per common share have been computed based upon net income available to common shareholders as presented in the accompanying consolidated statements of operations divided by the weighted average number of common shares outstanding or assumed to be outstanding. The computation of basic and dilutive earnings per share is summarized below:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Weighted average number of common shares outstanding		7,524,075			7,593,929			7,524,075			7,593,929
Effect of ESOP shares		(169,607	)		(128,959	)		(126,945	)		(121,518	)
Adjusted weighted average number of common shares used in computing basic net income per common share		7,354,468			7,464,970			7,397,130			7,472,411
Effect of dilutive stock options		—			—			—			—
Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per common share		7,354,468			7,464,970			7,397,130			7,472,411

Note 4 – Investment Securities

Carrying amounts and fair values of securities available for sale are summarized below:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
September 30, 2012	Cost		Gains		Losses		Value
	(dollars in thousands)
U.S. Treasury	$	33,263	$	1,777	$	—	$	35,040
U.S. Government agencies		35,484		937		14		36,407
GSE - Mortgage-backed securities and CMO’s		49,636		393		139		49,890
State and political subdivisions		8,182		755		—		8,937
Total securities available for sale	$	126,565	$	3,862	$	153	$	130,274
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2011	Cost		Gains		Losses		Value
	(dollars in thousands)
U.S. Treasury	$	32,073	$	1,459	$	—	$	33,532
U.S. Government agencies		19,142		855		—		19,997
GSE - Mortgage-backed securities and CMO’s		24,016		332		85		24,263
State and political subdivisions		10,071		798		—		10,869
Total securities available for sale	$	85,302	$	3,444	$	85	$	88,661

At both September 30, 2012 and December 31, 2011 the Company owned Federal Reserve stock reported at cost of $802,850 and is included in other assets. Also at September 30, 2012 and December 31, 2011, the Company owned Federal Home Loan Bank Stock (FHLB) of $1.5 million and $2.5 million, respectively. The investments in Federal Reserve stock and FHLB stock are required investments related to the Company’s membership in, and borrowings, with these banks. These investments are carried at cost since there is no ready market and historically redemption has been made at par value. The Company estimated that the fair value approximated cost and that these investments were not impaired at September 30, 2012.

-9-

Results from sales of securities available for sale for the three and nine month period ended September 30, 2012 and September 30, 2011 are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012			2011
	(dollars in thousands)
Gross proceeds from sales	$	—	$	—	$	8,996		$	25,568
Realized gains from sales	$	—	$	—	$	128		$	933
Realized losses from sales		—		—		(112	)		—
Net Realized gains	$	—	$	—	$	16		$	933

At September 30, 2012 and December 31, 2011 securities available for sale with a carrying amount of $46.4 million and $37.7 million, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

The following tables show the gross unrealized losses and fair value of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2012 and December 31, 2011. These unrealized losses on investment securities are a result of temporary fluctuations in the market prices due to a rise in interest rates, which will adjust if rates decline, and a volatile market and are in no way a reflection of the quality of the investments. At September 30, 2012, the unrealized losses related to one government agency bond and seven mortgage backed securities. At December 31, 2011, the unrealized losses related to three mortgage backed securities.

	Less than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
September 30, 2012	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(dollars in thousands)
Securities available for sale temporary impairment
U.S. Government agencies	$	2,807	$	14	$	—	$	—	$	2,807	$	14
GSE - Mortgage-backed securities and CMO’s		23,902		139		—		—		23,902		139
	$	26,709	$	153	$	—	$	—	$	26,709	$	153
	Less than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
December 31, 2011	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(dollars in thousands)
Securities available for sale temporary impairment
GSE - Mortgage-backed securities and CMO’s	$	9,734	$	85	$	—	$	—	$	9,734	$	85
	$	9,734	$	85	$	—	$	—	$	9,734	$	85

Declines in the fair value of the investment portfolio are believed by management to be temporary in nature. When evaluating an investment for other-than-temporary impairment losses, management considers among other things, the length of time and the extent to which the fair value has been in a loss position, the financial condition of the issuer and the intent and the ability the Company has to hold the investment until the loss position is recovered.

Any unrealized losses were largely due to increases in market interest rates over the yields available at the time of purchase. The fair value is expected to recover as the bonds approach their maturity date or market yields for such investments decline. At September 30, 2012, the Company had no intent to sell and not more likely than not to be required to sell the available for sale securities that were in a loss position prior to full recovery

-10-

The aggregate amortized cost and fair value of the available for sale securities portfolio at September 30, 2012 by remaining contractual maturity are as follows:

	September 30, 2012
	Amortized		Estimated		Book
Securities available for sale	Cost		Fair Value		Yield (1)
U. S. Treasury
Due after one but within five years		16,290		17,210		1.90	%
Due after five but within ten years		16,973		17,830		1.76	%
		33,263		35,040		1.83	%
U.S. Government agencies
Due after one but within five years		26,648		27,479		1.84	%
Due after five but within ten years		8,836		8,928		1.43	%
		35,484		36,407		1.73	%
Mortgage-backed securities
Due after five but within ten years		7,008		7,141		3.50	%
Due after ten years		42,628		42,749		2.89	%
		49,636		49,890		2.98	%
State and political subdivisions
Due within twelve months		351		354		3.63	%
Due after one but within five years		1,562		1,648		3.51	%
Due after five but within ten years		4,771		5,296		3.10	%
Due after ten years		1,498		1,639		4.12	%
		8,182		8,937		3.39	%
Total Securities available for sale
Due within twelve months		351		354		3.63	%
Due after one but within five years		44,500		46,337		1.92	%
Due after five but within ten years		37,588		39,195		2.18	%
Due after ten years		44,126		44,388		2.93	%
	$	126,565	$	130,274		2.35	%

1) Yields on securities and investments exempt from federal and/or state income taxes are stated on a fully tax- equivalent basis, assuming a 38.55% tax rate.

Note 5 – Loans Held for Investment

The composition of net loans held for investment by class as of September 30, 2012 and December 31, 2011 are as follows:

	September 30,			December 31,
	2012			2011
	(dollars in thousands)
Commercial
Commercial	$	41,628		$	45,907
Real estate - commercial		106,628			114,944
Other real estate construction loans		26,379			31,601
Noncommercial
Real estate 1-4 family construction		2,827			5,543
Real estate - residential		97,286			101,847
Home equity		50,432			51,413
Consumer loans		13,309			14,710
Other loans		768			602
		339,257			366,567
Less:
Allowance for loan losses		(6,883	)		(6,815	)
Deferred loan (fees) costs, net		86			108
Loans held for investment, net	$	332,460		$	359,860

-11-

Note 6 - Allowance for Loan Losses

The following table shows the change in the allowance for loss losses by loan segment for the three and nine month periods ended September 30, 2012 and 2011, respectively:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Commercial	2012			2011			2012			2011
	(dollars in thousands)
Balance, beginning of period	$	2,650		$	3,662		$	2,904		$	5,363
Provision (recovery) charged to operations		424			370			476			1,184
Charge-offs		(367	)		(1	)		(721	)		(2,520	)
Recoveries		5			4			53			8
Net (charge-offs)		(362	)		3			(668	)		(2,512	)
Balance at end of period	$	2,712		$	4,035		$	2,712		$	4,035
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Non-Commercial	2012			2011			2012			2011
	(dollars in thousands)
Balance, beginning of period	$	4,419		$	3,612		$	3,911		$	3,704
Provision (recovery) charged to operations		(33	)		113			618			828
Charge-offs		(229	)		(118	)		(400	)		(994	)
Recoveries		14			24			42			93
Net (charge-offs)		(215	)		(94	)		(358	)		(901	)
Balance at end of period	$	4,171		$	3,631		$	4,171		$	3,631

The following table shows period-end loans and reserve balances by loan segment both individually and collectively evaluated for impairment at September 30, 2012 and December 31, 2011:

	Individually Evaluated				Collectively Evaluated				Total
September 30, 2012	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,240	$	17,308	$	1,472	$	157,777	$	2,712	$	175,085
Non-Commercial		1,428		15,149		2,743		149,023		4,171		164,172
Total	$	2,668	$	32,457	$	4,215	$	306,800	$	6,883	$	339,257
	Individually Evaluated				Collectively Evaluated				Total
December 31, 2011	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,137	$	18,882	$	1,767	$	173,570	$	2,904	$	192,452
Non-Commercial		1,446		14,207		2,465		159,908		3,911		174,115
Total	$	2,583	$	33,089	$	4,232	$	333,478	$	6,815	$	366,567

-12-

Past due loan information is used by management when assessing the adequacy of the allowance for loan losses. The following table summarizes the past due information of the loan portfolio by class:

			Loans								Accruing
	Loans		90 Days								Loans 90 or
	30-89 Days		or More		Total Past		Current		Total		More Days
September 30, 2012	Past Due		Past due		Due Loans		Loans		Loans		Past Due
	(dollars in thousands)
Commercial	$	428	$	37	$	465	$	41,163	$	41,628	$	—
Real estate - commercial		629		2,235		2,864		103,764		106,628		—
Other real estate construction		250		3,193		3,443		22,936		26,379		—
Real estate 1 -4 family construction		—		—		—		2,827		2,827		—
Real estate - residential		1,549		2,845		4,394		92,892		97,286		—
Home equity		690		306		996		49,436		50,432		—
Consumer loans		203		1		204		13,105		13,309		—
Other loans		—		—		—		768		768		—
Total	$	3,749	$	8,617	$	12,366	$	326,891	$	339,257	$	—
			Loans								Accruing
	Loans		90 Days								Loans 90 or
	30-89 Days		or More		Total Past		Current		Total		More Days
December 31, 2011	Past Due		Past due		Due Loans		Loans		Loans		Past Due
	(dollars in thousands)
Commercial	$	212	$	329	$	541	$	45,366	$	45,907	$	—
Real estate - commercial		2,396		2,742		5,138		109,806		114,944		—
Other real estate construction		358		2,084		2,442		29,159		31,601		—
Real estate construction		—		—		—		5,543		5,543		—
Real estate - residential		2,341		2,441		4,782		97,065		101,847		—
Home equity		298		255		553		50,860		51,413		—
Consumer loan		208		11		219		14,491		14,710		—
Other loans		—		—		—		602		602		—
Total	$	5,813	$	7,862	$	13,675	$	352,892	$	366,567	$	—

Once a loan becomes 90 days past due, the loan is automatically transferred to a nonaccrual status. The exception to this policy is credit card loans that remain in accruing 90 days or more until they are paid current or charged off. Also, mortgage loans that were originated for sale but were not sold and are being held in the loan portfolio remain in an accruing status until they are foreclosed.

The composition of nonaccrual loans by class as of September 30, 2012 and December 31, 2011 is as follows:

	September 30,		December 31,
	2012		2011
	(dollars in thousands)
Commercial	$	37	$	329
Real estate - commercial		2,235		2,742
Other real estate construction		3,193		2,084
Real estate 1 – 4 family construction		—		—
Real estate – residential		2,845		2,441
Home equity		306		255
Consumer loans		1		11
Other loans		—		—
	$	8,617	$	7,862

Management uses a risk-grading program to facilitate the evaluation of probable inherent loan losses and to measure the adequacy of the allowance for loan losses. In this program, risk grades are initially assigned by the loan officers and reviewed and monitored by the lenders and credit administration. The program has eight risk grades summarized in five categories as follows:

Pass: Loans that are pass grade credits include loans that are fundamentally sound and risk factors are reasonable and acceptable. They generally conform to policy with only minor exceptions and any major exceptions are clearly mitigated by other economic factors.

-13-

Watch: Loans that are watch credits include loans on management’s watch list where a risk concern may be anticipated in the near future.

Substandard: Loans that are considered substandard are loans that are inadequately protected by current sound net worth, paying capacity of the obligor or the value of the collateral pledged. All nonaccrual loans are graded as substandard.

Doubtful: Loans that are considered to be doubtful have all weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make the collection or liquidation in full on the basis of current existing facts, conditions and values highly questionable and improbable.

Loss: Loans that are considered to be a loss are considered to be uncollectible and of such little value that their continuance as bankable assets is not warranted.

The tables below summarize risk grades of the loan portfolio by class at September 30, 2012 and December 31 2011:

					Sub-
September 30, 2012	Pass		Watch		standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	39,828	$	1,113	$	687	$	—	$	41,628
Real estate - commercial		88,921		8,469		9,238		—		106,628
Other real estate construction		21,279		480		4,620		—		26,379
Real estate 1 - 4 family construction		2,827		—		—		—		2,827
Real estate - residential		81,621		7,613		8,052		—		97,286
Home equity		48,481		702		1,249		—		50,432
Consumer loans		12,617		493		199		—		13,309
Other loans		768		—		—		—		768
Total	$	296,342	$	18,870	$	24,045	$	—	$	339,257
					Sub-
December 31, 2011	Pass		Watch		standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	42,892	$	1,670	$	1,345	$	—	$	45,907
Real estate - commercial		95,699		7,971		11,274		—		114,944
Other real estate construction		26,256		745		4,600		—		31,601
Real estate 1 - 4 family construction		5,538		5		—		—		5,543
Real estate - residential		89,209		4,269		8,369		—		101,847
Home equity		49,743		861		809		—		51,413
Consumer loans		13,970		332		408		—		14,710
Other loans		602		—		—		—		602
Total	$	323,909	$	15,853	$	26,805	$	—	$	366,567

-14-

Loans that are in nonaccrual status or 90 days past due and still accruing are considered to be nonperforming. The following tables show the breakdown between performing and nonperforming loans by class at September 30, 2012 and December 31, 2011:

			Non-
September 30, 2012	Performing		Performing		Total
	(dollars in thousands)
Commercial	$	41,591	$	37	$	41,628
Real estate - commercial		104,393		2,235		106,628
Other real estate construction		23,186		3,193		26,379
Real estate 1 – 4 family construction		2,827		—		2,827
Real estate – residential		94,441		2,845		97,286
Home equity		50,126		306		50,432
Consumer loans		13,308		1		13,309
Other loans		768		—		768
Total	$	330,640	$	8,617	$	339,257
			Non-
December 31, 2011	Performing		Performing		Total
	(dollars in thousands)
Commercial	$	45,578	$	329	$	45,907
Real estate - commercial		112,202		2,742		114,944
Other real estate construction		29,517		2,084		31,601
Real estate 1 – 4 family construction		5,543		—		5,543
Real estate – residential		99,406		2,441		101,847
Home equity		51,158		255		51,413
Consumer loans		14,699		11		14,710
Other loans		602		—		602
Total	$	358,705	$	7,862	$	366,567

Loans are considered impaired when, based on current information and events it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement. If a loan is deemed impaired, a specific calculation is performed and a specific reserve is allocated, if necessary. The tables below summarize the loans deemed impaired and the amount of specific reserves allocated by class at September 30, 2012 and December 31, 2011:

			Recorded		Recorded
	Unpaid		Investment		Investment
	Principal		With No		With		Related
September 30, 2012	Balance		Allowance		Allowance		Allowance
	(dollars in thousands)
Commercial	$	1,221	$	765	$	337	$	247
Real estate - commercial		14,105		8,073		3,969		829
Other real estate construction		4,166		2,712		1,452		164
Real estate 1 -4 family construction		720		617		103		103
Real estate - residential		12,696		7,235		5,461		1,007
Home equity		1,405		885		520		180
Consumer loans		328		57		271		138
Other loans		—		—		—		—
Total	$	34,641	$	20,344	$	12,113	$	2,668

-15-

			Recorded		Recorded
	Unpaid		Investment		Investment
	Principal		With No		With		Related
December 31, 2011	Balance		Allowance		Allowance		Allowance
	(dollars in thousands)
Commercial	$	2,099	$	889	$	1,091	$	578
Real estate - commercial		14,951		11,365		1,523		452
Other real estate construction		4,016		2,644		1,370		107
Real estate 1 -4 family construction		1,095		501		594		202
Real estate - residential		11,877		7,231		4,646		1,001
Home equity		993		753		240		124
Consumer loans		242		49		193		119
Other loans		—		—		—		—
Total	$	35,273	$	23,432	$	9,657	$	2,583

	Three Months ended				Three Months ended
	September 30, 2012				September 30, 2011
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Income		Investment		Income
	(dollars in thousands)
Commercial	$	1,112	$	23	$	1,912	$	32
Real estate - commercial		12,245		153		12,496		167
Other real estate construction		4,168		55		6,749		48
Real estate 1 -4 family construction		1,014		15		1,490		31
Real estate - residential		12,680		166		10,522		43
Home equity		1,333		18		1,435		24
Consumer loans		343		4		321		4
Other loans		—		—		—		—
Total	$	32,895	$	434	$	34,925	$	349

	Nine Months ended				Nine Months ended
	September 30, 2012				September 30, 2011
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Income		Investment		Income
	(dollars in thousands)
Commercial	$	1,301	$	50	$	1,529	$	75
Real estate - commercial		12,397		493		16,162		430
Other real estate construction		4,112		180		8,456		79
Real estate 1 -4 family construction		1,124		31		1,347		57
Real estate - residential		12,261		477		9,947		368
Home equity		1,244		42		1,348		46
Consumer loans		332		14		297		14
Other loans		—		—		—		—
Total	$	32,771	$	1,287	$	39,086	$	1,069

Note 7 – Troubled Debt Restructures

A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification involves providing a concession to the existing loan contract. The Company offers various types of concessions when modifying loans to troubled borrowers, however, forgiveness of principal is rarely granted. Concessions offered are term extensions, capitalizing accrued interest, reducing interest rates to below current market rates or a combination of any of these. Combinations from time to time may include allowing a customer to be placed on interest-only payments. The presentations below in the “other” category are TDR’s with a combination of concessions. At the time of a TDR, additional collateral or a guarantor may be requested.

-16-

Loans modified as a TDR are typically already on nonaccrual status and partial chargeoffs may have in some cases already been taken against the outstanding loan balance. The Company classifies TDR loans as impaired loans and evaluates the need for an allowance for loan loss on a loan-by-loan basis. An allowance is based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the estimated fair value of the underlying collateral less any selling costs, if the loan is deemed to be collateral dependent.

For the three and nine months ended September 30, 2012 the following table presents a breakdown of the types of concessions made by loan class:

			Pre-Modification		Post-Modification
For the three months	Number		Outstanding Recorded		Outstanding Recorded
ended September 30, 2012	of Contracts		Investment		Investment
			(dollars in thousands)
Other:
Commercial		1	$	33	$	33
Real estate - commercial		—		—		—
Other real estate construction		1		49		49
Real estate 1 – 4 family construction		—		—		—
Real estate – residential		4		217		217
Home equity		—		—		—
Consumer loans		2		62		62
Other loans		—		—		—
Total		8	$	361	$	361
			Pre-Modification		Post-Modification
For the nine months	Number		Outstanding Recorded		Outstanding Recorded
ended September 30, 2012	of Contracts		Investment		Investment
			(dollars in thousands)
Other:
Commercial		3	$	111	$	101
Real estate - commercial		2		619		113
Other real estate construction		1		49		49
Real estate 1 – 4 family construction		—		—		—
Real estate – residential		5		242		240
Home equity		—		—		—
Consumer loans		3		114		108
Other loans		—		—		—
Total		14	$	1,135	$	611

-17-

The following table presents loans that were modified as troubled debt restructurings within the previous twelve months ending September 30, 2012 for which there was a payment default:

	Twelve months ended
	September 30, 2012
	Number		Recorded
	of Loans		Investment
	(dollars in thousands)
Other:
Commercial		1	$	33
Real estate – commercial		—		—
Other real estate construction		1		49
Real estate 1 – 4 family construction		—		—
Real estate – residential		5		240
Home Equity loans		—		—
Consumer loans		2		64
Other loans		—		—
		9	$	386
Total		9	$	386

A default on a troubled debt restructure is defined as being past due 90 days or being out of compliance with the modification agreement. As mentioned, the Company considers TDRs to be impaired loans and has $491,777 in allowance for loan loss as of September 30, 2012, a direct result of these TDR’s.

The following table presents the successes and failures of the types of modifications within the previous twelve months ending September 30, 2012:

	Paid In Full				Paying as restructured				Converted to nonaccrual				Foreclosure/ Default
	Number of		Recorded		Number of		Recorded		Number of		Recorded		Number of		Recorded
September 30, 2012	Loans		Investments		Loans		Investments		Loans		Investments		Loans		Investments
	(dollars in thousands)
Below market interest rate		—	$	—		—	$	—		—	$	—		—	$	—
Other Loans		—		—		15		738		—		—		2		511
Total		—	$	—		15	$	738		—	$	—		2	$	511

The Company has not committed to fund any additional disbursements for TDR’s.

Note 8 - Commitments and Contingencies

The subsidiary banks are party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of their customers. These financial instruments include commitments to extend credit, lines of credit and standby letters of credit. These instruments involve elements of credit risk in excess of amounts recognized in the accompanying financial statements.

The banks’ risk of loss with the unfunded loans and lines of credit or standby letters of credit is represented by the contractual amount of these instruments. The banks use the same credit policies in making commitments under such instruments as they do for on-balance sheet instruments. The amount of collateral obtained, if any, is based on management’s credit evaluation of the borrower. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Credit card commitments are unsecured. At September 30, 2012, outstanding financial instruments whose contract amounts represent credit risk were approximately:

(in thousands)
Commitments to extend credit	$	64,319
Credit card commitments		7,922
Standby letters of credit		1,345
Total commitments	$	73,586

-18-

Note 9 – Fair Value Disclosures

Accounting Standards Codification (ASC) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.

ASC 820 defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which those assets or liabilities are sold and considers assumptions that market participants would use when pricing those assets or liabilities. Fair values determined using Level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based on Level 2 inputs, which exist when observable data exists for similar assets and liabilities. Fair values for assets and liabilities for which identical or similar assets and liabilities are not actively traded in observable markets are based on Level 3 inputs, which are considered to be unobservable.

Among the Company’s assets and liabilities, investment securities available for sale are reported at their fair values on a recurring basis. Certain other assets are adjusted to their fair value on a nonrecurring basis, including other real estate owned, impaired loans, loans held for sale, which are carried at the lower of cost or market; loan servicing rights, where fair value is determined using similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions; and goodwill, which is periodically tested for impairment. Deposits, short-term borrowings and long-term obligations are not reported at fair value.

Prices for US Treasury securities are readily available in the active markets in which those securities are traded, and the resulting fair values are shown in the ‘Level 1 input’ column. Prices for government agency securities, mortgage-backed securities and for state, county and municipal securities are obtained for similar securities, and the resulting fair values are shown in the ‘Level 2 input’ column. Prices for all other non-marketable investments are determined based on various assumptions that are not observable. The fair values for these investment securities are shown in the ‘Level 3 input’ column. Non-marketable investment securities, which are carried at their purchase price, include those that may only be redeemed by the issuer. The changes in securities between Level 1 and Level 2 were related to the purchase and sale of several securities and not the transfer of securities.

The Company does not record loans at fair value on a recurring basis. 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 measures impairment by using one of several methods including collateral value, fair value of similar debt and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the present value of the expected repayments or fair value of collateral exceed the recorded investments in such loans. At September 30, 2012, substantially all of the total impaired loans were evaluated based on the

-19-

fair value of the underlying collateral. 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 internal assessment of fair value based upon market data issued or management determines the fair value of the underlying collateral is further impaired below the appraised value, the Company records the impaired loan as nonrecurring Level 3.

Foreclosed assets are adjusted to fair value upon transfer of the loans to other real estate owned. Real estate acquired in settlement of loans is recorded initially at estimated fair value of the property less estimated selling costs at the date of foreclosure. The initial recorded value may be subsequently reduced by additional allowances, which are charged to earnings if the estimated fair value of the property less estimated selling costs declines below the initial recorded value. 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 foreclosed asset as nonrecurring Level 2. When an internal assessment of fair value based upon market data issued or management determines the fair value of the underlying collateral is further impaired below the appraised value, the Company records the impaired loan as nonrecurring Level 3.

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate, based on secondary market prices. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Servicing assets are evaluated for impairment based upon the fair value. Fair value is determined based upon discounted cash flows using market-based assumptions.

The following table provides fair value information for assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011:

	September 30, 2012
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	35,040	$	35,040	$	—	$	—
US Government Agencies		36,407		—		36,407		—
GSE - Mortgage-backed securities and CMO’s		49,890		—		49,890		—
State and political subdivisions		8,937		—		8,937		—
Total assets at fair value	$	130,274	$	35,040	$	95,234	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

-20-

	December 31, 2011
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	33,532	$	33,532	$	—	$	—
US Gov’t		19,997		—		19,997		—
Mortgage-backed securities and CMO’s		24,263		—		24,263		—
State and political subdivisions		10,869		—		10,869		—
Total assets at fair value	$	88,661	$	33,532	$	55,129	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of September 30, 2012 and December 31, 2011:

	September 30, 2012
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	9,445	$	—	$	—	$	9,445
Loans held for sale		1,025		—		1,025		—
Other real estate owned		6,011		—		—		6,011
Total assets at fair value	$	16,481	$	—	$	1,025	$	15,456
Total liabilities at fair value	$	—	$	—	$	—	$	—
	December 31, 2011
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	7,074	$	—	$	—	$	7,074
Loans held for sale		1,958		—		1,958		—
Other real estate owned		1,464		—		—		1,464
Total assets at fair value	$	10,496	$	—	$	1,958	$	8,538
Total liabilities at fair value	$	—	$	—	$	—	$	—

Note 10 - Fair Values of Financial Instruments and Interest Rate Risk

ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring basis or non-recurring basis.

The fair value estimates presented at September 30, 2012 and December 31, 2011, are based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price an asset could be sold at or the price a liability could be settled for. However, given there is no active market or observable market transactions for many of the Company’s financial instruments, the Company has made estimates of many of

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these fair values which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. The estimated fair values disclosed in the following table do not represent market values of all assets and liabilities of the Company and should not be interpreted to represent the underlying value of the Company. The following table reflects a comparison of carrying amounts and the estimated fair value of the financial instruments as of September 30, 2012 and December 31, 2011:

	Carrying		Estimated
September 30, 2012	Value		Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	26,197	$	26,197	$	26,197	$	—	$	—
Securities available for sale		130,274		130,274		35,040		95,234		—
Loans held for investment, net		332,460		341,994		—		—		341,994
Loans held for sale		1,025		1,025		—		1,025		—
Restricted stock		2,265		2,265		2,265		—		—
Bank-owned life insurance		6,354		6,354		—		—		6,354
Mortgage servicing rights		2,404		2,512		—		—		2,512
Accrued interest receivable		1,935		1,935		—		—		1,935
FINANCIAL LIABILITIES
Deposits	$	450,400	$	452,034	$	—	$	—	$	452,034
Short-term borrowings		20,635		20,635		—		20,635		—
Long-term borrowings		1,549		1,788		—		1,788		—
Junior subordinated debt		11,127		11,272		—		—		11,272
Accrued interest payable		277		277		—		—		277

	Carrying		Estimated
December 31, 2011	Value		Fair Value
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	28,687	$	28,687
Securities available for sale		88,661		88,661
Loans held for investment, net		359,860		374,636
Loans held for sale		1,958		1,958
Restricted stock		3,289		3,289
Bank-owned life insurance		6,171		6,171
Mortgage servicing rights		2,128		2,494
Accrued interest receivable		2,084		2,084
FINANCIAL LIABILITIES
Deposits	$	431,338	$	430,641
Short-term borrowings		20,791		20,791
Long-term borrowings		14,106		14,611
Junior subordinated debt		11,127		11,283
Accrued interest payable		301		301

The following methods and assumptions were used by the Company in estimating the fair value of financial instruments:

• Cash and cash equivalents – The carrying amount of cash and cash equivalents approximate their fair values due to the short period of time until their expected realization and are recorded in Level 1.

• Securities available for sale – Securities available for sale are carried at fair value based on quoted and observable market prices and are recorded in Levels 1 and 2. Also see discussion in note 9.

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• Loans – The fair value of loans is estimated based on discounted expected cash flows using the current interest rates at which similar loans would be made and carried in level 3. Loans held for sale, which represent current mortgage production forward sales not yet delivered, are valued based on secondary market prices. The fair value of loans does not consider the lack of liquidity and uncertainty in the market that would affect the valuation. Loans held for sale are recorded in Level 2.

• Restricted stock – It is not practicable to determine fair value of restricted stock which is comprised of Federal Home Loan Bank and Federal Reserve Bank stock due to restrictions placed on its transferability and it is presented at its carrying value and is recorded in Level 1 due to the redemption provisions of the Federal Home Loan Bank and the Federal Reserve Bank.

• Bank-owned life insurance – The carrying amount of bank-owned life insurance is the current cash surrender value and is recorded in level 3.

• Mortgage serving rights – Fair value is determined based upon discounted cash flows using market-based assumptions and is recorded in Level 3.

• Accrued interest receivable and payable – Both accrued interest receivable and payable are recorded in Level 3, as there are not active markets for these.

• Deposits – The fair value of deposits is estimated based on discounted cash flow analyses using offered market rates and is recorded in Level 3. The fair value of deposits does not consider any customer related intangibles.

• Borrowings – The fair value disclosed for short-term borrowings, which are composed of overnight borrowings and debt due within one year approximate the carrying value for such debt and is recorded in Level 2. The estimated fair value for long-term borrowings are estimated based on discounted cash flow analyses using offered market rates. Total borrowings are carried in Level 2. Junior subordinated debt is fair valued based on discounted cash flow analyses and is recorded in Level 3.

At September 30, 2012, the subsidiary banks had outstanding standby letters of credit and commitments to extend credit. These off-balance sheet financial instruments are generally exercisable at the market rate prevailing at the date the underlying transaction will be completed; therefore, they were deemed to have no current fair value. See Note 8.

Note 11 – Recent Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurement”. The purpose of the standard is to clarify and combine fair value measurements and disclosure requirements for U.S. generally accepted accounting principles, or GAAP, and international financial reporting standards, or IFRS. The new standard provides amendments and wording changes used to describe certain requirements for measuring fair value and for disclosing information about fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2011, and should be applied prospectively to the beginning of the annual period of adoption. The adoption of this statement did not have a material impact on the consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, an update to ASC 220, “Comprehensive Income.” This update requires that all nonowner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, ASU 2011-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other

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comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. ASU 2011-05 is effective for annual periods beginning after December 15, 2011, and did not have a significant impact on the Company’s financial statements.

In September 2011, the FASB issued ASU 2011-08, an update to ASC 350 “Intangibles - Goodwill and Other.” This update gives entities the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. ASU 2011-08 is effective for annual and interim impairment tests beginning after December 15, 2011, and did not have a significant impact on the Company’s financial statements.

In July 2012, the FASB issued ASU 2012-02, an update to ASC 350 “Intangibles Goodwill and Other”. The amendments in the Update are intended to reduce cost and complexity by providing an entity the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative impairment test. The Update also enhances consistency of impairment testing guidance among long-lived asset categories by permitting entities to assess qualitative factors to determine whether it is necessary to calculate the asset’s fair value when testing for impairment, which is equivalent to the impairment testing requirements for other long-lived assets. In conducting a qualitative assessment, an entity should consider the extent to which relevant circumstances and events, both individually and in the aggregate, could have affected the significant inputs used to determine the fair value of the indefinite-lived intangible asset since the last assessment. Consideration should also be given as to whether there have been changes to the carrying amount of the indefinite-lived intangible asset when evaluating whether it is more likely than not that the indefinite-lived asset is impaired. Positive and mitigating events and circumstances that could affect its determination of whether it is more likely than not that the indefinite-lived asset is impaired should also be considered. The Update is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of this update is not expected to have a significant impact on the Company’s financial statements.

In August 2012, the FASB issued ASU 2012-03: Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22. The amendments in the Update codify various amendments and corrections, and are effective upon issuance (August 27, 2012). The adoption of these changes did not have a significant impact on the Company’s financial statements.

In October 2012, the FASB issued ASU 2012-04, Technical Corrections and Improvements. The amendments in this Update cover a wide range of Topics in the Codification, related to technical corrections and improvements and conforming amendments related to fair value measurements. The amendments in this Update represent changes to clarify the Codification, correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice. Certain of the amendments are subject to transition guidance, and will be effective for public entities for fiscal periods beginning after December 15, 2012. The adoption of these changes did not have a significant impact on the Company’s financial statements.

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From time to time the FASB issues exposure drafts of proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.

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Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q may contain certain forward-looking statements consisting of estimates with respect to the financial condition, results of operations and business of the Company that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting the Company’s operations, pricing, products and services. Any use of “we” or “our” in the following discussion refers to the Company.

Comparison of Financial Condition at September 30, 2012 and December 31, 2011.

During the nine months ended September 30, 2012, the Company’s total assets increased $8.0 million, from $526.9 million to $534.9 million. During the same period, loans held for investment decreased $27.4 million to $339.3 million, while, securities available for sale increased $41.6 million.

Cash and cash equivalents decreased $2.5 million, during the nine months ended September 30, 2012. Cash and due from banks decreased $721,000, while interest-earning deposits with banks decreased $1.8 million.

Investment securities increased $41.6 million to $130.3 million for the nine months ended September 30, 2012. During the first nine months of 2012, the Company purchased securities of $61.4 million. The increase from new purchases was reduced by maturities and calls of $825,000, sales of $9.0 million and normal reductions stemming from principal payments on mortgage backed securities. During the third quarter the Company purchased $35.3 million in additional securities to improve the yield on earning assets, which was funded in part from the paydowns in the loan portfolio and in part from an increase in deposits. At September 30, 2012, the Company had net unrealized gains of $3.7 million.

Loans held for investment decreased from $366.7 million to $339.3 million, a decrease of $27.4 million. Contributing to this decrease was the sale of a government guaranteed portion of a loan of approximately $4.9 million. All areas of the loan portfolio decreased during the third quarter. Commercial real estate experienced the largest decline of $8.3 million reflecting the sale of the aforementioned loan. Loans held for sale decreased 47.7% or $933,000 during the period. The allowance for loan losses was $6.9 million, at September 30, 2012, which represented 2.03% of the loan portfolio.

Other changes in our consolidated assets are related to premises and equipment, interest receivable, restricted stock, bank owned life insurance, other real estate owned, prepaid assets and other assets. Bank owned life insurance increased $183,000. Accrued interest receivable, prepaid assets and premises and equipment declined $149,000, $419,000 and $108,000, respectively. The Company’s restricted stock, which is required ownership in Federal Reserve Bank stock, remained at $803,000, while Federal Home Loan Bank stock decreased $239,000 to $1.5 million during the first nine months of 2012. The Company also owns $250,000 of Randolph Bank and Trust preferred stock. Management was been monitoring this stock for a period of time and during third quarter deemed it necessary to take a $50,000 impairment. Other real estate owned decreased $1.3 million. The Company sold ten properties totaling $2.0 million and had valuation write down adjustments of $988,000. These decreases were offset by the addition of ten new foreclosed properties totaling $1.6 million. Other assets increased $39,000.

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Customer deposits, our primary funding source, experienced a $19.1 million increase during the nine months ended September 30, 2012, increasing from $431.3 million to $450.4 million. Demand noninterest bearing checking increased $4.3 million and interest checking and money market accounts increased $17.6 million, while savings deposits increased $4.1 million for the period. These increases were offset by declines in time deposits over $100,000 of $2.5 million and other time deposits of $4.4 million.

Total borrowings decreased $12.7 million for the period and consist of both short-term and long-term borrowed funds, primarily from the Federal Home Loan Bank. The maturity of $10.0 million in Federal Home Loan Bank advances played a major part in the decrease. At September 30, 2012, $15.0 million of the total borrowings of $33.3 million were comprised of Federal Home Loan Bank advances.

Other liabilities increased from $3.6 million at December 31, 2011 to $4.5 million at September 30, 2012, an increase of $873,000.

At September 30, 2012, total shareholders’ equity was $46.4 million, an increase of $803,000 from December 31, 2011. Net income for the period was $1.4 million. Unrealized gains and losses on investment securities, net of tax increased $230,000. Net income was offset by an increase in unearned ESOP compensation of $111,000 resulting from a net increase in the ESOP note receivable. The Company also recorded $483,750 in dividends on its series A and B preferred stock for the nine month period ended September 30, 2012. The Company, after receiving approval from the United States Department of the Treasury and the Federal Reserve Bank repurchased common stock totaling $243,000. At September 30, 2012, the Company and its subsidiary banks exceeded all applicable regulatory capital requirements.

Comparison of Results of Operations for the Three Months Ended September 30, 2012 and 2011.

Net Income and Net Income Available to Common Shareholders

Uwharrie Capital Corp reported net income of $262,000 for the three months ended September 30, 2012, as compared to $255,000 for the three months ended September 30, 2011, an increase of $7,000. Net income available to common shareholders was $101,000 or $0.01 per common share for the three month period ended September 30, 2012, compared to $94,000 or $0.01 per common share for the comparative period ended September 30, 2011. Net income available to common shareholders is net income less any dividends on preferred stock related to the $10.0 million of capital received from the United States Department of the Treasury under the Capital Purchase Program in December 2008.

Net Interest Income

As with most financial institutions, the primary component of earnings for our banks is net interest income. Net interest income is the difference between interest income, principally from the loan and investment securities portfolios, and interest expense, principally on customer deposits and borrowings. Changes in net interest income result from changes in volume, spread and margin. For this purpose, volume refers to the average dollar level of interest-earning assets and interest-bearing liabilities, spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities, and margin refers to net interest income divided by average interest-earning assets. Margin is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities, as well as by levels of noninterest-bearing liabilities and capital.

Net interest income for the three months ended September 30, 2012 was $4.5 million, a decrease of $334,000. During the third quarter, the decline in the volume of interest-earning assets outpaced the decline in volume of interest-bearing liabilities by $247,000. The average

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yield on our interest–earning assets decreased 47 basis points to 4.61%, while the average rate we paid for our interest-bearing liabilities decreased 24 basis points. The Company’s assets that are interest rate sensitive adjust at the time the Federal Reserve adjusts interest rates, while interest-bearing time deposits adjust at the time of maturity. The aforementioned decreases resulted in a decrease of 23 basis points in our interest rate spread, from 3.96% in 2011 to 3.73% in 2012. Our net interest margin was 3.86% and 4.10% for the comparable periods in 2012 and 2011, respectively.

The following table presents average balance sheets and a net interest income analysis for the three months ended September 30, 2012 and 2011:

Average Balance Sheet and Net Interest Income Analysis

For the Three Months Ended September 30,

	Average Balance				Income/Expenses				Rate/Yield
(in thousands)	2012		2011		2012		2011		2012			2011
Interest-earning assets:
Taxable securities	$	109,611	$	80,236	$	520	$	446		1.89	%		2.21	%
Nontaxable securities (1)		10,212		10,611		75		92		4.76	%		5.60	%
Short-term investments		16,208		11,149		29		21		0.71	%		0.75	%
Taxable loans		330,705		369,370		4,702		5,392		5.66	%		5.81	%
Non-taxable loans (1)		12,319		11,442		107		107		5.60	%		6.02	%
Total interest-earning assets		479,055		482,808		5,433		6,058		4.61	%		5.08	%
Interest-bearing liabilities:
Interest-bearing deposits		374,426		372,969		623		844		0.66	%		0.90	%
Short-term borrowed funds		19,509		25,878		98		89		2.00	%		1.37	%
Long-term debt		14,003		24,274		180		259		5.11	%		4.24	%
Total interest bearing liabilities		407,938		423,121		901		1,192		0.88	%		1.12	%
Net interest spread	$	71,117	$	59,687	$	4,532	$	4,866		3.73	%		3.96	%
Net interest margin (1) (% of earning assets)										3.86	%		4.10	%

(1) Yields related to securities and loans exempt from income taxes are stated on a fully tax-equivalent basis, assuming a 38.55% tax rate.

Provision and Allowance for Loan Losses

The provision for loan losses was $391,000 for the three months ending September 30, 2012 compared to $483,000 for the same period in 2011. There were net loan charge-offs of $577,000 for the three months ended September 30, 2012, as compared with net loan charge-offs of $90,000 during the same period of 2011. Refer to the Asset Quality discussion on page 31 for further information.

Noninterest Income

The Company generates most of its revenue from net interest income; however, like all financial institutions, diversification of our revenue base is of major importance in our long term success. Total noninterest income increased $581,000 for the three month period ending September 30, 2012 as compared to the same period in 2011. The Company did not realize any gains or losses on the sale of investment securities during the three months ended September 30, 2012 or 2011. Income from mortgage loan sales increased $695,000 from $407,000 for the quarter ended September 30, 2011 to $1.1 million for the same period in 2012. Service charges on deposit accounts produced revenue of $450,000, a decrease of $26,000 for the three months ended September 30, 2012. The primary factor leading to this decrease was a decrease in non-sufficient funds or NSF fees for the comparable periods. Other service fees and commissions experienced a 9.49% decrease for the comparable three month period, primarily related to a reduction in the write-down of servicing assets due to the refinancing of mortgage loans.

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Noninterest Expense

Noninterest expense for the quarter ended September 30, 2012 was $6.2 million compared to $5.9 million for the same period of 2011, an increase of $272,000. Salaries and employee benefits, the largest component of noninterest expense, increased $144,000 for the quarter ending September 30, 2012. Foreclosed real estate expense increased $192,000 while professional fees and service fees decreased $119,000 for the three months ending September 30, 2012. The major factor related to the increase in foreclosed real estate expense was write downs on properties held in other real estate owned. These write downs were attributed to updated appraisals and the lowering of list prices in the third quarter of 2012 totaling $461,000 compared to no write downs for the same period in 2011. The decrease in other professional fees and services was directly related to reimbursement of prior period legal fees totaling $93,000 that was related to a reimbursement for legal services under the Company’s employment practices liability insurance policy. Other noninterest expense increased $38,000 for the comparable three month periods. The table below reflects the composition of other noninterest expense.

Other noninterest expense

	Three Months Ended
	September 30,
	2012		2011
	(in thousands)
Postage	$	44	$	50
Telephone and data lines		41		40
Loan collection expense		81		68
Shareholder relations expense		51		57
Dues and subscriptions		39		35
Other		376		344
Total	$	632	$	594

Income Tax Expense

The Company had income tax expense of $109,000 for the three months ended September 30, 2012 compared to income tax expense of $49,000 in the 2011 period.

Comparison of Results of Operations for the Nine Months Ended September 30, 2012 and 2011.

Net Income and Net Income Available to Common Shareholders

The Company reported net income of $1.4 million for the nine months ended September 30, 2012, as compared to $1.2 for the nine months ended September 30, 2011, an increase of $190,000. Net income available to common shareholders was $879,000 or $0.12 per common share during the nine month period ending September 30, 2012, compared to $689,000 or $0.09 per common share for the comparative 2011 period. Net income available to common shareholders is net income less any dividends on preferred stock related to the $10.0 million of capital received from the United States Department of the Treasury under the Capital Purchase Program in December 2008.

Net Interest Income

Net interest income for the nine months ended September 30, 2012 was $13.7 million as compared with $14.3 million during the nine months ended September 30, 2011, resulting in a

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decrease of $579,000. During the nine months ending September 30, 2012, the decline in the volume of interest-earning assets outpaced the decline in growth of our interest-bearing liabilities by $880,000. The average yield on our interest–earning assets decreased 27 basis points to 4.76%, while the average rate we paid for our interest-bearing liabilities decreased 23 basis points. The Company’s assets that are interest rate sensitive adjust at the time the Federal Reserve adjusts interest rates, while interest-bearing time deposits adjust at the time of maturity. The aforementioned changes resulted in a decrease of four basis points in our interest rate spread to 3.83% for the first nine months of 2012, compared to 3.87% for the first nine months of 2011. Our net interest margin was 3.97% and 4.01% for the comparable nine month periods in 2012 and 2011, respectively. A portion of the Company’s loan portfolio has interest rate floors and caps in place on the loans. This feature has allowed the Company to maintain a strong interest margin while there has been a decline in rates; however, this feature could hurt the margin in a rising rate environment.

The following table presents average balance sheets and a net interest income analysis for the nine months ended September 30, 2012 and 2011:

Average Balance Sheet and Net Interest Income Analysis

For the Nine Months Ended September 30,

	Average Balance				Income/Expenses				Rate/Yield
(in thousands)	2012		2011		2012		2011		2012			2011
Interest-earning assets:
Taxable securities	$	85,607	$	80,317	$	1,201	$	1,391		1.87	%		2.31	%
Nontaxable securities(1)		9,966		10,593		254		278		5.55	%		5.72	%
Short-term investments		24,717		12,054		101		39		0.55	%		0.43	%
Taxable loans		340,693		374,484		14,629		15,989		5.74	%		5.70	%
Non-taxable loans(1)		12,489		9,501		328		269		5.70	%		6.16	%
Total interest-earning assets		473,472		486,949		16,513		17,966		4.76	%		5.03	%
Interest-bearing liabilities:
Interest-bearing deposits		369,210		374,564		1,948		2,618		0.70	%		0.93	%
Short-term borrowed funds		18,078		24,254		253		271		1.87	%		1.49	%
Long-term debt		18,389		26,503		621		807		4.51	%		4.07	%
Total interest bearing liabilities		405,677		425,321		2,822		3,696		0.93	%		1.16	%
Net interest spread	$	67,795	$	61,628	$	13,692	$	14,270		3.83	%		3.87	%
Net interest margin(1) (% of earning assets)										3.97	%		4.01	%

(1) Yields related to securities and loans exempt from income taxes are stated on a fully tax-equivalent basis, assuming a 38.55% tax rate.

Provision and Allowance for Loan Losses

The provision for loan losses was $1.1 million for the nine months ending September 30, 2012 compared to $2.0 million for the same period in 2011. There were net loan charge-offs of $1.0 million for the nine months ended September 30, 2012 as compared with net loan charge-offs of $3.4 million during the same period of 2011. Refer to the Asset Quality discussion on page 31 for further information.

Noninterest Income

The Company generates most of its revenue from net interest income; however, like all financial institutions, diversification of our earnings base is of major importance in our long term success. Total noninterest income increased $560,000 for the nine month period ending September 30, 2012 as compared to the same period in 2011. Income from mortgage loan sales increased $1.5 million from $1.1 million for the nine months ended September 30, 2011 to $2.6 million for

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the same period in 2012. Mortgage loan rates continued to decline during 2012 allowing customers to refinance again at even lower rates. Service charges on deposit accounts produced earnings of $1.3 million for the nine months ended September 30, 2012, a decrease of $51,000 from the comparative period in 2011. The primary contributing factor is a decrease in NSF fees due in large part to changes in the regulatory governance. Other service fees and commissions experienced a 9.78% decrease for the comparable nine month period. This is related to acceleration in the write-down of servicing assets due to the refinancing of mortgage loans. The Company realized a gain on the aforementioned government guaranteed loan in the amount of $276,000. The Company also realized gains on the sale of investments in the amount of $16,000 in the first nine months of 2012, as compared to realized gains of $933,000 for the same period in 2011.

Noninterest Expense

Noninterest expense for the nine months ended September 30, 2012, was $17.5 million compared to $17.0 million for the same period of 2011; an increase of $555,000. Salaries and employee benefits, the largest component of noninterest expense, increased $312,000 to $9.5 million for the period ending September 30, 2012. Net occupancy and equipment expense had a combined decrease of $48,000. Professional fees and services decreased $693,000. Foreclosed real estate expense increased $877,000. The major factor related to the increase in foreclosed real estate expense was write downs on properties held in other real estate owned. These write downs were attributed to updated appraisals and the lowering of list prices during the first nine months of 2012 totaling $988,000 compared to no write downs for the same period in 2011. The decrease in other professional fees and services was directly related to reimbursement of prior period legal fees totaling $360,000. Of this amount, $270,000 was related to a reimbursement for legal services under the Company’s employment practices liability insurance policy and $90,000 associated with a previous closed government guaranteed loan. Other noninterest expense increased $71,000 for the comparable nine month periods. The table below reflects the composition of other noninterest expense.

Other noninterest expense

	Nine Months Ended
	September 30,
	2012		2011
	(in thousands)
Postage	$	148	$	148
Telephone and data lines		130		133
Loan collection expense		225		214
Shareholder relations expense		129		136
Dues and subscriptions		128		137
Other		1,068		989
Total	$	1,828	$	1,757

Income Tax Expense

The Company had income tax expense of $561,000 for the nine months ended September 30, 2012 resulting in an effective tax rate of 29.16%, compared to income tax expense of $407,000 and an effective rate of 25.76% in the 2011 period.

Asset Quality

The Company’s allowance for loan losses is established through charges to earnings in the form of a provision for loan losses. The allowance is increased by provisions charged to operations and by recoveries of amounts previously charged off and is reduced by loans

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charged off. Management continuously evaluates the adequacy of the allowance for loan losses. In evaluating the adequacy of the allowance, management considers the following: the growth, composition and industry diversification of the portfolio; historical loan loss experience; current delinquency levels; adverse situations that may affect a borrower’s ability to repay; estimated value of any underlying collateral; prevailing economic conditions and other relevant factors. The Company’s credit administration function, through a review process, periodically validates the accuracy of the initial risk grade assessment. In addition, as a given loan’s credit quality improves or deteriorates, the credit administration department has the responsibility to change the borrower’s risk grade accordingly. For loans determined to be impaired, the allowance is based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the estimated fair value of the underlying collateral less the selling costs. This evaluation is inherently subjective, as it requires material estimates, including the amounts and timing of future cash flows expected to be received on impaired loans, which may be susceptible to significant change. In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require additions for estimated losses based upon judgments different from those of management.

Management uses a risk-grading program to facilitate the evaluation of probable inherent loan losses and the adequacy of the allowance for loan losses. In this program, risk grades are initially assigned by loan officers and reviewed and monitored by credit administration. The Company strives to maintain its loan portfolio in accordance with conservative loan underwriting policies that result in loans specifically tailored to the needs of its market area. Every effort is made to identify and minimize the credit risks associated with such lending strategies. The Company has no foreign loans and does not engage in significant lease financing or highly leveraged transactions. The Company follows a loan review program designed to evaluate the credit risk in the loan portfolio. This process includes the maintenance of an internally classified watch list that is designed to help management assess the overall quality of the loan portfolio and the adequacy of the allowance for loan losses. In establishing the appropriate classification for specific assets, management considers, among other factors, the estimated value of the underlying collateral, the borrower’s ability to repay, the borrower’s payment history and the current delinquent status. As a result of this process, certain loans are categorized as substandard, doubtful or loss, and reserves are allocated based on management’s judgment and historical experience.

The allowance for loan losses represents management’s best estimate of an appropriate amount to provide for inherent risk in the loan portfolio in the normal course of business. While management believes that it uses the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary and results of operations could be adversely affected if circumstances differ from the assumptions used in making the determinations. Furthermore, while management believes it has established the allowance for loan losses in conformity with generally accepted accounting principles, there can be no assurance that banking regulators, in reviewing the Company’s portfolio, will not require an adjustment to the allowance for loan losses. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary, should the quality of any loans deteriorate as a result of the factors discussed herein. Any material increase in the allowance for loan losses may adversely affect the Company’s financial condition and results of operations.

The provision for loan losses was $1.1 million for the nine month period ended September 30, 2012 as compared to $2.0 million for the same period in 2011. At September 30, 2012, the levels of our impaired loans, which includes all loans in nonaccrual status and other loans deemed by management to be impaired, were $32.5 million compared to $33.1 million at December 31, 2011, an decrease of $631,000. Total nonaccrual loans, which are a component of impaired loans, increased from $7.9 million at December 31, 2011 to $8.6 million at September 30, 2012. The Company had net loan charge-offs for the first nine months of 2012 of $1.0 million compared to net loan charge-offs of $3.4 million for the same period in 2011.

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The allowance expressed as a percentage of gross loans held for investment increased 17 basis points from 1.86% at December 31, 2011 to 2.03% at September 30, 2012. The collectively evaluated reserve allowance as a percentage of collectively evaluated loans was 1.27% at December 31, 2011 and 1.37% at September 30, 2012; while the individually evaluated allowance as a percentage of individually evaluated loans increased from 7.81% to 8.22%, an increase of 41 basis points.

Our allowance for loan loss model captures not only the mean loss of individual loans but also the rare event of severe loss that can occur within the loan portfolio. Specifically, the Company calculates probable losses on loans by computing a probability of loss and expected loss scenario by call codes. Together, these components created from Ordinary Least Squares (OLS) Regression of historical losses against multiple Macro-Economic factors make up the basis of the allowance model. The loans that are impaired and included in the specific reserve are excluded from these calculations. The Company also has a section within the model to account for other qualitative and/or environmental factors. During the second quarter of 2012, the Company completed an extensive review of its home equity portfolio that resulted in an additional $179,000 being added in the qualitative section of the model. Nonperforming loans, which consist of nonaccrual loans and loans past due 90 days and still accruing, to total loans increased from 2.14% at December 31, 2011, to 2.54% at September 30, 2012. Management believes the current level of the allowance for loan losses is appropriate in light of the risk inherent in the loan portfolio.

Restructured loans at September 30, 2012 totaled $5.7 million and $6.0 million at December 31, 2011 and are included in impaired loans.

The following nonperforming loan table shows the comparison of September 30, 2012 to December 31, 2011:

Nonperforming Assets

	September 30,			December 31,
(dollars in thousands)	2012			2011
Nonperforming assets:
Loans past due 90 days or more	$	—		$	—
Nonaccrual loans		8,617			7,862
Other real estate owned		8,947			10,258
Total nonperforming assets	$	17,564		$	18,120
Allowance for loan losses	$	6,883		$	6,815
Nonperforming loans to total loans		2.54	%		2.14	%
Allowance for loan losses to total loans		2.03	%		1.86	%
Nonperforming assets to total assets		3.28	%		3.44	%
Allowance for loan losses to nonperforming loans		79.88	%		86.88	%

During the first nine months of 2012, the Company had a net decrease of $1.3 million in other real estate owned. The decrease was due to the sale of ten pieces of property totaling $2.0 million and valuation write downs of $988,000. These decreases were offset by the addition of ten pieces of property totaling $1.6 million.

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Liquidity and Capital Resources

The objective of the Company’s liquidity management policy is to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on any opportunities for expansion. Liquidity management addresses the ability to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature and to fund new loans and investments as opportunities arise.

The Company’s primary sources of internally generated funds are principal and interest payments on loans, cash flows generated from operations and cash flow generated by investments. Growth in deposits is typically the primary source of funds for loan growth. The Company and its subsidiary banks have multiple funding sources, in addition to deposits that can be used to increase liquidity and provide additional financial flexibility. These sources are the subsidiary banks’ established federal funds lines with correspondent banks aggregating $23.8 million at September 30, 2012, with available credit of $23.8 million; established borrowing relationships with the Federal Home Loan Bank, with available credit of $27.2 million; access to borrowings from the Federal Reserve Bank discount window, with available credit of $25.0 million and the issuance of commercial paper. The Company has also secured long-term debt from other sources. Total debt from these sources aggregated $33.3 million at September 30, 2012, compared to $46.0 million at December 31, 2011.

Banks and bank holding companies, as regulated institutions, must meet required levels of capital. The Federal Reserve, the primary federal regulator of the Company and its subsidiary banks, has adopted minimum capital regulations or guidelines that categorize components and the level of risk associated with various types of assets.

Regulatory guidelines require a minimum of total capital to risk-adjusted assets ratio of 8 percent and a Tier 1 leverage ratio of 4 percent. Banks are considered “well capitalized” by regulatory standards when they meet or exceed a Tier 1 risk-based capital ratio of 6 percent, a total risked-based capital ratio of 10 percent and a leverage ratio of 5 percent. Financial institutions are expected to maintain a level of capital commensurate with the risk profile assigned to their assets in accordance with those guidelines.

The Company and its subsidiary banks have each maintained capital levels exceeding minimum levels for “well capitalized” banks and bank holding companies. The Company expects to continue to exceed minimum capital requirements without altering current operations or strategy. At September 30, 2012, the Company had $11.1 million in subordinated debt and $10.0 million in preferred stock issued to the United States Department of the Treasury and has made all interest and dividend payments in a timely manner.

Accounting and Regulatory Matters

Management is not aware of any known trends, events, uncertainties or current recommendations by regulatory authorities that will have or that are reasonably likely to have a material effect on the Company’s liquidity, capital resources, or other operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s primary market risk is interest rate risk. Interest rate risk is the result of differing maturities or repricing intervals of interest-earning assets and interest-bearing liabilities and the fact that rates on these financial instruments do not change uniformly. These conditions may impact the earnings generated by the Company’s interest earning assets or the cost of its interest-bearing liabilities, thus directly impacting the Company’s overall earnings. The

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Company’s management actively monitors and manages interest rate risk. One way this is accomplished is through the development of and adherence to the Company’s asset/liability policy. This policy sets forth management’s strategy for matching the risk characteristics of the Company’s interest-earning assets and liabilities so as to mitigate the effect of changes in the rate environment. In management’s opinion, the Company’s market risk profile has not changed significantly since December 31, 2011.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act (“Exchange Act”) Rule 13a-15.

Based upon that evaluation, the principal executive officer and principal financial officer concluded that in their opinion, the Company’s disclosure controls and procedures were effective (1) to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Management of the Company has evaluated, with the participation of the Company’s principal executive officer and principal financial officer, changes in the Company’s internal controls over financial reporting (as defined in Rule 13a -15(f) and 15d – 15(f) of the Exchange Act) during the third quarter of 2012. In connection with such evaluation, the Company has determined that there were no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company reviews its disclosure controls and procedures, which may include its internal control over financial reporting, on an ongoing basis, and may from time to time make changes aimed at enhancing their effectiveness and to ensuring that the Company’s systems evolve with its business.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Neither the Company nor its subsidiaries, nor any of their properties are subject to any material legal proceedings. From time to time, the Banks are engaged in ordinary routine litigation incidental to their business.

Item 1A. Risk Factors

Disclosure under this item is not required for smaller reporting companies.

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

The following table sets forth information with respect to shares of common stock repurchased by the Company during the three months ended September 30, 2012.

	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Program (1)		(d) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans (2)(3)
July 1, 2012 Through July 31, 2012		—	$	—		—	$	—
August 1, 2012 Through August 31, 2012		6,250	$	3.20		—	$	—
September 1, 2012 Through September 30, 2012		38,653	$	4.00		—	$	—
Total		44,903	$	3.89		—	$	—

(1) Trades of the Company’s stock occur in the Over-the-Counter market from time to time. The Company also has in place a Stock Repurchase Plan that provides liquidity to its shareholders in the event a willing buyer is not available to purchase shares that are offered for sale. The Company is under no obligation to purchase shares offered; however, it will accommodate such offers as its Stock Repurchase Plan allows. This plan was initially adopted in 1995 and is approved annually by resolution of the Board of Directors or the Executive Committee of the Board.

Pursuant to the terms of the United States Department of the Treasury’s investment in the Company’s preferred stock under the Capital Purchase Program (“CPP”), the Company must obtain the prior consent of the United States Department of the Treasury to repurchase its common stock under the Stock Purchase Plan or to pay a cash dividend.

(2) On June 26, 2012 the Board of Directors of Uwharrie Capital Corp, after receiving approval from the United States Department of Treasury and the Federal Reserve Bank, its primary regulator, approved the repurchase of up to $400,000 of outstanding common stock. On August 16, 2012, 6,250 shares were repurchased for $20,000. On September 29, 2012, 38,653 shares were repurchased for $154,612. As of September 30, 2012, there was $156,773 for repurchase under the approved plan.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

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Item 6. Exhibits

Exhibit Number	Description of Exhibit
3.1	Registrant’s Articles of Incorporation (1)
3.2	Registrant’s By-laws (6)
3.2	Articles of Amendment dated December 19, 2008, regarding Series A and Series B Preferred Stock (5)
4	Form of stock certificate (1)
4.2	Form of certificate for the Series A Preferred stock (5)
4.3	Form of certificate for the Series B Preferred stock (5)
4.4	Warrant dated December 23, 2008, for purchase of share of Series B Preferred stock (5)
4.5	Form of Security Holders Agreement (9)
10.1	Incentive Stock Option Plan, as amended (1)
10.2	Employee Stock Ownership Plan and Trust (2)
10.3	2006 Incentive Stock Option Plan (3)
10.4	2006 Employee Stock Purchase Plan (3)
10.5	Amendment to the Employee Stock Ownership Plan and Trust (4)
10.6	Letter Agreement dated December 23, 2008, between the Registrant and the United States Department of the Treasury (5)
10.7	Relocation Assistance Agreement dated February 9, 2009, between the Registrant and Brendan P. Duffey (7)
10.8	Nonqualified Deferred Compensation Plan and Supplemental Retirement Plan Agreement dated December 31, 2008, between the Registrant and Roger L. Dick, Brendan P. Duffey, Christy D. Stoner, and Jimmy L. Strayhorn (7)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (filed herewith)
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (filed herewith)

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32	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101	Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012, in XBRL (eXtensible Business Reporting Language) (8)

(1) Incorporated by reference from exhibits to Registrant’s Registration Statement on Form S-4 (Reg. No. 33-58882).

(2) Incorporated by reference to Registrant’s Annual Report on Form 10-KSB for the Fiscal year ended 1999.

(3) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2007.

(4) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2008.

(5) Incorporated by reference to Registrant’s current report on Form 8-K, filed with the Securities and Exchange Commission on December 23, 2008.

(6) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2009.

(7) Incorporated by reference to Registrant’s Annual Report on Form 10-K for the Fiscal year ended 2009.

(8) Pursuant to Regulation 406T of Regulation S-T, these interactive data files are furnished and not filed or part of a registration statement or prospectus for purposes of section 11 or 12 of the Securities Act of 1933, as amended, or section 18 of the Securities Exchange Act of 1934, as amended, and are otherwise not subject to liability.

(9) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	UWHARRIE CAPITAL CORP
	(Registrant)
Date: November 14, 2012	By:	/s/ Roger L. Dick
	Roger L. Dick
	President and Chief Executive Officer
Date: November 14, 2012	By:	/s/ Robert O. Bratton
	Robert O. Bratton
	Principal Financial Officer

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EXHIBIT INDEX

Exhibit
Number	Description of Exhibit
4.1	Registrant’s Articles of Incorporation (1)
3.2	Registrant’s By-laws (6)
3.2	Articles of Amendment dated December 19, 2008, regarding Series A and Series B Preferred Stock (5)
5	Form of stock certificate (1)
4.2	Form of certificate for the Series A Preferred stock (5)
4.3	Form of certificate for the Series B Preferred stock (5)
4.4	Warrant dated December 23, 2008, for purchase of share of Series B Preferred stock (5)
4.5	Form of Security Holders Agreement (9)
10.9	Incentive Stock Option Plan, as amended (1)
10.10	Employee Stock Ownership Plan and Trust (2)
10.11	2006 Incentive Stock Option Plan (3)
10.12	2006 Employee Stock Purchase Plan (3)
10.13	Amendment to the Employee Stock Ownership Plan and Trust (4)
10.14	Letter Agreement dated December 23, 2008, between the Registrant and the United States Department of the Treasury (5)
10.15	Relocation Assistance Agreement dated February 9, 2009, between the Registrant and Brendan P. Duffey (7)
10.16	Nonqualified Deferred Compensation Plan and Supplemental Retirement Plan Agreement dated December 31, 2008, between the Registrant and Roger L. Dick, Brendan P. Duffey, Christy D. Stoner, and Jimmy L. Strayhorn (7)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (filed herewith)
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (filed herewith)
32	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

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101 Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012, in XBRL (eXtensible Business Reporting Language) ⁽⁸⁾

(1) Incorporated by reference from exhibits to Registrant’s Registration Statement on Form S-4 (Reg. No. 33-58882).

(2) Incorporated by reference to Registrant’s Annual Report on Form 10-KSB for the Fiscal year ended 1999.

(3) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2007.

(4) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2008.

(5) Incorporated by reference to Registrant’s current report on Form 8-K, filed with the Securities and Exchange Commission on December 23, 2008.

(6) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2009.

(7) Incorporated by reference to Registrant’s Annual Report on Form 10-K for the Fiscal year ended 2009.

(8) Pursuant to Regulation 406T of Regulation S-T, these interactive data files are furnished and not filed or part of a registration statement or prospectus for purposes of section 11 or 12 of the Securities Act of 1933, as amended, or section 18 of the Securities Exchange Act of 1934, as amended, and are otherwise not subject to liability.

(9) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2011.

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EX-31.1

Exhibit 31.1

UWHARRIE CAPITAL CORP

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Rule 13a -14(a)

I, Roger L. Dick, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended September 30, 2012 of Uwharrie Capital Corp (the “registrant”);

2. Based on my knowledge, this 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 report;

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

b) Designed such internal control over financial reporting, or caused 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 report based on such evaluation; 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 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 the 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 14, 2012	/s/ Roger L. Dick
	Roger L. Dick
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

UWHARRIE CAPITAL CORP

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to Rule 13a -14(a)

I, Robert O. Bratton, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended September 30, 2012 of Uwharrie Capital Corp the (“registrant”);

2. Based on my knowledge, this 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 report;

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

b) Designed such internal control over financial reporting, or caused 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 report based on such evaluation; 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 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 the 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 14, 2012	/s/ Robert O. Bratton
	Robert O. Bratton
	Principal Financial Officer

EX-32

Exhibit 32

Certification pursuant to 18 U.S.C. 1350 as adopted pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned each hereby certifies that, to his knowledge, (i) the Form 10-Q filed by Uwharrie Capital Corp (the “Issuer”) for the quarter ended September 30, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.

Date: November 14, 2012	/s/ Roger L. Dick
	Roger L. Dick
	President and Chief Executive Officer
Date: November 14, 2012	/s/ Robert O. Bratton
	Robert O. Bratton
	Principal Financial Officer

XML

Allowance for Loan Losses (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Past due information of the loan portfolio by class
Loans 30-89 Days Past Due	$ 3,749	$ 5,813
Loans 90 Days or More Past Due	8,617	7,862
Total Past Due Loans	12,366	13,675
Current Loans	326,891	352,892
Net loans held for investment	332,460	359,860	[1]
Accruing Loans 90 or More Days Past Due
Commercial [Member]
Past due information of the loan portfolio by class
Loans 30-89 Days Past Due	428	212
Loans 90 Days or More Past Due	37	329
Total Past Due Loans	465	541
Current Loans	41,163	45,366
Net loans held for investment	41,628	45,907
Accruing Loans 90 or More Days Past Due
Real estate-commercial [Member]
Past due information of the loan portfolio by class
Loans 30-89 Days Past Due	629	2,396
Loans 90 Days or More Past Due	2,235	2,742
Total Past Due Loans	2,864	5,138
Current Loans	103,764	109,806
Net loans held for investment	106,628	114,944
Accruing Loans 90 or More Days Past Due
Other real estate construction [Member]
Past due information of the loan portfolio by class
Loans 30-89 Days Past Due	250	358
Loans 90 Days or More Past Due	3,193	2,084
Total Past Due Loans	3,443	2,442
Current Loans	22,936	29,159
Net loans held for investment	26,379	31,601
Accruing Loans 90 or More Days Past Due
Real estate 1-4 family construction [Member]
Past due information of the loan portfolio by class
Loans 30-89 Days Past Due
Loans 90 Days or More Past Due
Total Past Due Loans
Current Loans	2,827	5,543
Net loans held for investment	2,827	5,543
Accruing Loans 90 or More Days Past Due
Real estate-residential [Member]
Past due information of the loan portfolio by class
Loans 30-89 Days Past Due	1,549	2,341
Loans 90 Days or More Past Due	2,845	2,441
Total Past Due Loans	4,394	4,782
Current Loans	92,892	97,065
Net loans held for investment	97,286	101,847
Accruing Loans 90 or More Days Past Due
Home equity [Member]
Past due information of the loan portfolio by class
Loans 30-89 Days Past Due	690	298
Loans 90 Days or More Past Due	306	255
Total Past Due Loans	996	553
Current Loans	49,436	50,860
Net loans held for investment	50,432	51,413
Accruing Loans 90 or More Days Past Due
Consumer loans [Member]
Past due information of the loan portfolio by class
Loans 30-89 Days Past Due	203	208
Loans 90 Days or More Past Due	1	11
Total Past Due Loans	204	219
Current Loans	13,105	14,491
Net loans held for investment	13,309	14,710
Accruing Loans 90 or More Days Past Due
Other loans [Member]
Past due information of the loan portfolio by class
Loans 30-89 Days Past Due
Loans 90 Days or More Past Due
Total Past Due Loans
Current Loans	768	602
Net loans held for investment	768	602
Accruing Loans 90 or More Days Past Due

[1] Derived from audited consolidated financial statements

XML

Troubled Debts Restructures (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2012
Troubled Debt Restructure Period (Textual) [Abstract]
Troubled debt restructure is defined as being past due	90 days
Allowance for loan loss on TDR	$ 491,777

XML

Troubled Debts Restructures (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012 Loan
Loans modified as troubled debt restructurings within the previous twelve months for which there was a payment default
Number of Loans	9
Recorded Investment	$ 386
Other [Member]
Loans modified as troubled debt restructurings within the previous twelve months for which there was a payment default
Number of Loans	9
Recorded Investment	386
Commercial [Member] | Other [Member]
Loans modified as troubled debt restructurings within the previous twelve months for which there was a payment default
Number of Loans	1
Recorded Investment	33
Real estate-commercial [Member] | Other [Member]
Loans modified as troubled debt restructurings within the previous twelve months for which there was a payment default
Number of Loans
Recorded Investment
Other real estate construction [Member] | Other [Member]
Loans modified as troubled debt restructurings within the previous twelve months for which there was a payment default
Number of Loans	1
Recorded Investment	49
Real estate 1-4 family construction [Member] | Other [Member]
Loans modified as troubled debt restructurings within the previous twelve months for which there was a payment default
Number of Loans
Recorded Investment
Real estate-residential [Member] | Other [Member]
Loans modified as troubled debt restructurings within the previous twelve months for which there was a payment default
Number of Loans	5
Recorded Investment	240
Home equity [Member] | Other [Member]
Loans modified as troubled debt restructurings within the previous twelve months for which there was a payment default
Number of Loans
Recorded Investment
Consumer loans [Member] | Other [Member]
Loans modified as troubled debt restructurings within the previous twelve months for which there was a payment default
Number of Loans	2
Recorded Investment	64
Other loans [Member] | Other [Member]
Loans modified as troubled debt restructurings within the previous twelve months for which there was a payment default
Number of Loans
Recorded Investment

XML

Investment Securities (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Gross unrealized losses and fair value of investments
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Fair Value	$ 26,709	$ 9,734
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Unrealized Losses	153	85
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Fair Value
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Unrealized Losses
Available-for-sale Securities, Gross unrealized losses, Fair Value	26,709	9,734
Available-for-sale Securities, Gross unrealized losses, Unrealized Losses	153	85
U.S. Government agencies [Member]
Gross unrealized losses and fair value of investments
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Fair Value	2,807
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Unrealized Losses	14
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Fair Value
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Unrealized Losses
Available-for-sale Securities, Gross unrealized losses, Fair Value	2,807
Available-for-sale Securities, Gross unrealized losses, Unrealized Losses	14
GSE-Mortgage-backed securities and CMO's [Member]
Gross unrealized losses and fair value of investments
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Fair Value	23,902	9,734
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Unrealized Losses	139	85
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Fair Value
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Unrealized Losses
Available-for-sale Securities, Gross unrealized losses, Fair Value	23,902	9,734
Available-for-sale Securities, Gross unrealized losses, Unrealized Losses	$ 139	$ 85

XML

Troubled Debts Restructures (Tables)

9 Months Ended

Sep. 30, 2012

Troubled Debts Restructures [Abstract]

Breakdown of the types of concessions made by loan class

For the three and nine months ended September 30, 2012 the following table presents a breakdown of the types of concessions made by loan class:

			Pre-Modification		Post-Modification
For the three months	Number		Outstanding Recorded		Outstanding Recorded
ended September 30, 2012	of Contracts		Investment		Investment
			(dollars in thousands)
Other:
Commercial		1	$	33	$	33
Real estate - commercial		—		—		—
Other real estate construction		1		49		49
Real estate 1 – 4 family construction		—		—		—
Real estate – residential		4		217		217
Home equity		—		—		—
Consumer loans		2		62		62
Other loans		—		—		—
Total		8	$	361	$	361
			Pre-Modification		Post-Modification
For the nine months	Number		Outstanding Recorded		Outstanding Recorded
ended September 30, 2012	of Contracts		Investment		Investment
			(dollars in thousands)
Other:
Commercial		3	$	111	$	101
Real estate - commercial		2		619		113
Other real estate construction		1		49		49
Real estate 1 – 4 family construction		—		—		—
Real estate – residential		5		242		240
Home equity		—		—		—
Consumer loans		3		114		108
Other loans		—		—		—
Total		14	$	1,135	$	611

Loans modified as troubled debt restructurings within the previous twelve months for which there was a payment default

The following table presents loans that were modified as troubled debt restructurings within the previous twelve months ending September 30, 2012 for which there was a payment default:

	Twelve months ended
	September 30, 2012
	Number		Recorded
	of Loans		Investment
	(dollars in thousands)
Other:
Commercial		1	$	33
Real estate – commercial		—		—
Other real estate construction		1		49
Real estate 1 – 4 family construction		—		—
Real estate – residential		5		240
Home Equity loans		—		—
Consumer loans		2		64
Other loans		—		—
		9	$	386
Total		9	$	386

Schedule of successes and failures of the types of debt restructuring

The following table presents the successes and failures of the types of modifications within the previous twelve months ending September 30, 2012:

	Paid In Full				Paying as restructured				Converted to nonaccrual				Foreclosure/ Default
	Number of		Recorded		Number of		Recorded		Number of		Recorded		Number of		Recorded
September 30, 2012	Loans		Investments		Loans		Investments		Loans		Investments		Loans		Investments
	(dollars in thousands)
Below market interest rate		—	$	—		—	$	—		—	$	—		—	$	—
Other Loans		—		—		15		738		—		—		2		511
Total		—	$	—		15	$	738		—	$	—		2	$	511

XML

Fair Value Disclosures (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Level 1 [Member]
Securities available for sale
Total assets at fair value	$ 35,040
Level 2 [Member]
Securities available for sale
Total assets at fair value	95,234
Level 3 [Member]
Securities available for sale
Total assets at fair value
Fair Value on a recurring basis [Member]
Securities available for sale
Total assets at fair value	130,274	88,661
Total liabilities at fair value
Fair Value on a recurring basis [Member] | U.S. Treasury [Member]
Securities available for sale
Total assets at fair value	35,040	33,532
Fair Value on a recurring basis [Member] | U.S. Government agencies [Member]
Securities available for sale
Total assets at fair value	36,407	19,997
Fair Value on a recurring basis [Member] | GSE-Mortgage-backed securities and CMO's [Member]
Securities available for sale
Total assets at fair value	49,890	24,263
Fair Value on a recurring basis [Member] | State and political subdivisions [Member]
Securities available for sale
Total assets at fair value	8,937	10,869
Fair Value on a recurring basis [Member] | Level 1 [Member]
Securities available for sale
Total assets at fair value	35,040	33,532
Total liabilities at fair value
Fair Value on a recurring basis [Member] | Level 1 [Member] | U.S. Treasury [Member]
Securities available for sale
Total assets at fair value	35,040	33,532
Fair Value on a recurring basis [Member] | Level 1 [Member] | U.S. Government agencies [Member]
Securities available for sale
Total assets at fair value
Fair Value on a recurring basis [Member] | Level 1 [Member] | GSE-Mortgage-backed securities and CMO's [Member]
Securities available for sale
Total assets at fair value
Fair Value on a recurring basis [Member] | Level 1 [Member] | State and political subdivisions [Member]
Securities available for sale
Total assets at fair value
Fair Value on a recurring basis [Member] | Level 2 [Member]
Securities available for sale
Total assets at fair value	95,234	55,129
Total liabilities at fair value
Fair Value on a recurring basis [Member] | Level 2 [Member] | U.S. Treasury [Member]
Securities available for sale
Total assets at fair value
Fair Value on a recurring basis [Member] | Level 2 [Member] | U.S. Government agencies [Member]
Securities available for sale
Total assets at fair value	36,407	19,997
Fair Value on a recurring basis [Member] | Level 2 [Member] | GSE-Mortgage-backed securities and CMO's [Member]
Securities available for sale
Total assets at fair value	49,890	24,263
Fair Value on a recurring basis [Member] | Level 2 [Member] | State and political subdivisions [Member]
Securities available for sale
Total assets at fair value	8,937	10,869
Fair Value on a recurring basis [Member] | Level 3 [Member]
Securities available for sale
Total assets at fair value
Total liabilities at fair value
Fair Value on a recurring basis [Member] | Level 3 [Member] | U.S. Treasury [Member]
Securities available for sale
Total assets at fair value
Fair Value on a recurring basis [Member] | Level 3 [Member] | U.S. Government agencies [Member]
Securities available for sale
Total assets at fair value
Fair Value on a recurring basis [Member] | Level 3 [Member] | GSE-Mortgage-backed securities and CMO's [Member]
Securities available for sale
Total assets at fair value
Fair Value on a recurring basis [Member] | Level 3 [Member] | State and political subdivisions [Member]
Securities available for sale
Total assets at fair value

XML

Allowance for Loan Losses (Details 5) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Dec. 31, 2011
Performing and nonperforming financing receivable
Financing Receivable	$ 332,460		$ 359,860	[1]
Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	330,640		358,705
Non-Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	8,617		7,862
Commercial [Member]
Performing and nonperforming financing receivable
Financing Receivable	41,628		45,907
Commercial [Member] | Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	41,591		45,578
Commercial [Member] | Non-Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	37		329
Real estate-commercial [Member]
Performing and nonperforming financing receivable
Financing Receivable	106,628		114,944
Real estate-commercial [Member] | Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	104,393		112,202
Real estate-commercial [Member] | Non-Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	2,235		2,742
Other real estate construction [Member]
Performing and nonperforming financing receivable
Financing Receivable	26,379		31,601
Other real estate construction [Member] | Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	23,186		29,517
Other real estate construction [Member] | Non-Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	3,193		2,084
Real estate 1-4 family construction [Member]
Performing and nonperforming financing receivable
Financing Receivable	2,827		5,543
Real estate 1-4 family construction [Member] | Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	2,827		5,543
Real estate-residential [Member]
Performing and nonperforming financing receivable
Financing Receivable	97,286		101,847
Real estate-residential [Member] | Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	94,441		99,406
Real estate-residential [Member] | Non-Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	2,845		2,441
Home equity [Member]
Performing and nonperforming financing receivable
Financing Receivable	50,432		51,413
Home equity [Member] | Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	50,126		51,158
Home equity [Member] | Non-Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	306		255
Consumer loans [Member]
Performing and nonperforming financing receivable
Financing Receivable	13,309		14,710
Consumer loans [Member] | Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	13,308	[1]	14,699
Consumer loans [Member] | Non-Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	1		11
Other loans [Member]
Performing and nonperforming financing receivable
Financing Receivable	768		602
Other loans [Member] | Performing [Member]
Performing and nonperforming financing receivable
Financing Receivable	$ 768		$ 602

[1] Derived from audited consolidated financial statements

XML

Allowance for Loan Losses (Details) (USD $) In Thousands, unless otherwise specified				3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011		Sep. 30, 2012 Commercial [Member]	Sep. 30, 2011 Commercial [Member]	Sep. 30, 2012 Commercial [Member]	Sep. 30, 2011 Commercial [Member]	Sep. 30, 2012 Non-Commercial [Member]	Sep. 30, 2011 Non-Commercial [Member]	Sep. 30, 2012 Non-Commercial [Member]	Sep. 30, 2011 Non-Commercial [Member]
Changes in the allowance for loan losses
Balance, beginning of period	$ 6,883	$ 6,815	[1]	$ 2,650	$ 3,662	$ 2,904	$ 5,363	$ 4,419	$ 3,612	$ 3,911	$ 3,704
Provision (recovery) charged to operations				424	370	476	1,184	(33)	113	618	828
Charge-offs				(367)	(1)	(721)	(2,520)	(229)	(118)	(400)	(994)
Recoveries				5	4	53	8	14	24	42	93
Net (charge-offs)				(362)	3	(668)	(2,512)	(215)	(94)	(358)	(901)
Balance at end of period	$ 6,883	$ 6,815	[1]	$ 2,712	$ 4,035	$ 2,712	$ 4,035	$ 4,171	$ 3,631	$ 4,171	$ 3,631

[1] Derived from audited consolidated financial statements

XML

Fair Values of Financial Instruments and Interest Rate Risk (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Financial Assets
Loans held for investment, net	$ 332,460	$ 359,860	[1]
Loans held for sale	1,025	1,958	[1]
Restricted stock	1,500	2,500
Bank owned life insurance	6,354	6,171	[1]
Accrued interest receivable	1,935	2,084	[1]
Financial Liabilities
Deposits	450,400	431,338	[1]
Short-term borrowings	20,635	20,791	[1]
Accrued interest payable	277	301	[1]
Level 1 [Member]
Financial Assets
Cash and cash equivalents	26,197
Securities available for sale	35,040
Loans held for investment, net
Loans held for sale
Restricted stock	2,265
Bank owned life insurance
Mortgage servicing rights
Accrued interest receivable
Financial Liabilities
Deposits
Short-term borrowings
Long-term borrowings
Junior subordinated debt
Accrued interest payable
Level 2 [Member]
Financial Assets
Cash and cash equivalents
Securities available for sale	95,234
Loans held for investment, net
Loans held for sale	1,025
Restricted stock
Bank owned life insurance
Mortgage servicing rights
Accrued interest receivable
Financial Liabilities
Deposits
Short-term borrowings	20,635
Long-term borrowings	1,788
Junior subordinated debt
Accrued interest payable
Level 3 [Member]
Financial Assets
Cash and cash equivalents
Securities available for sale
Loans held for investment, net	341,994
Loans held for sale
Restricted stock
Bank owned life insurance	6,354
Mortgage servicing rights	2,512
Accrued interest receivable	1,935
Financial Liabilities
Deposits	452,034
Short-term borrowings
Long-term borrowings
Junior subordinated debt	11,272
Accrued interest payable	277
Carrying Value [Member]
Financial Assets
Cash and cash equivalents	26,197	28,687
Securities available for sale	130,274	88,661
Loans held for investment, net	332,460	359,860
Loans held for sale	1,025	1,958
Restricted stock	2,265	3,289
Bank owned life insurance	6,354	6,171
Mortgage servicing rights	2,404	2,128
Accrued interest receivable	1,935	2,084
Financial Liabilities
Deposits	450,400	431,338
Short-term borrowings	20,635	20,791
Long-term borrowings	1,549	14,106
Junior subordinated debt	11,127	11,127
Accrued interest payable	277	301
Estimated Fair Value [Member]
Financial Assets
Cash and cash equivalents	26,197	28,687
Securities available for sale	130,274	88,661
Loans held for investment, net	341,994	374,636
Loans held for sale	1,025	1,958
Restricted stock	2,265	3,289
Bank owned life insurance	6,354	6,171
Mortgage servicing rights	2,512	2,494
Accrued interest receivable	1,935	2,084
Financial Liabilities
Deposits	452,034	430,641
Short-term borrowings	20,635	20,791
Long-term borrowings	1,788	14,611
Junior subordinated debt	11,272	11,283
Accrued interest payable	$ 277	$ 301

[1] Derived from audited consolidated financial statements

XML

Troubled Debts Restructures (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012 Loan
Paying as restructured [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans	15
Recorded Investment	$ 738
Paid in Full [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans
Recorded Investment
Foreclosure/Default [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans	2
Recorded Investment	511
Converted to nonaccrual [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans
Recorded Investment
Below market interest rate [Member] | Paying as restructured [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans
Recorded Investment
Below market interest rate [Member] | Paid in Full [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans
Recorded Investment
Below market interest rate [Member] | Foreclosure/Default [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans
Recorded Investment
Below market interest rate [Member] | Converted to nonaccrual [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans
Recorded Investment
Other loans [Member] | Paying as restructured [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans	15
Recorded Investment	738
Other loans [Member] | Paid in Full [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans
Recorded Investment
Other loans [Member] | Foreclosure/Default [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans	2
Recorded Investment	511
Other loans [Member] | Converted to nonaccrual [Member]
Schedule of successes and failures of the types of debt restructuring
Number of Loans
Recorded Investment

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2012

Basis of Presentation [Abstract]

Basis of Presentation

Note 1 - Basis of Presentation

The financial statements and accompanying notes are presented on a consolidated basis including Uwharrie Capital Corp (the “Company”) and its subsidiaries, Bank of Stanly (“Stanly”), Anson Bank & Trust Co. (“Anson”), Cabarrus Bank & Trust Company (“Cabarrus”), Strategic Investment Advisors, Inc. (“SIA”), and Uwharrie Mortgage Inc. Stanly consolidates its subsidiaries, the Strategic Alliance Corporation, BOS Agency, Inc. and Gateway Mortgage, Inc., each of which is wholly-owned by Stanly.

The information contained in the consolidated financial statements is unaudited. In the opinion of management, the consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) and material adjustments necessary for a fair presentation of results of interim periods, all of which are of a normal recurring nature, have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for an entire year. Management is not aware of economic events, outside influences or changes in concentrations of business that would require additional clarification or disclosure in the consolidated financial statements.

The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to consolidated financial statements filed as part of the Company’s 2011 Annual Report on Form 10-K. This Quarterly Report should be read in conjunction with such Annual Report.

XML

Allowance for Loan Losses (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Impaired Financing Receivables
Unpaid Principal Balance	$ 34,641		$ 34,641		$ 35,273
Recorded Investment With No Allowance	20,344		20,344		23,432
Recorded Investment With Allowance	12,113		12,113		9,657
Related Allowance	2,668		2,668		2,583
Average Recorded Investment	32,895	34,925	32,771	39,086
Interest Income	434	349	1,287	1,069
Commercial [Member]
Impaired Financing Receivables
Unpaid Principal Balance	1,221		1,221		2,099
Recorded Investment With No Allowance	765		765		889
Recorded Investment With Allowance	337		337		1,091
Related Allowance	247		247		578
Average Recorded Investment	1,112	1,912	1,301	1,529
Interest Income	23	32	50	75
Real estate-commercial [Member]
Impaired Financing Receivables
Unpaid Principal Balance	14,105		14,105		14,951
Recorded Investment With No Allowance	8,073		8,073		11,365
Recorded Investment With Allowance	3,969		3,969		1,523
Related Allowance	829		829		452
Average Recorded Investment	12,245	12,496	12,397	16,162
Interest Income	153	167	493	430
Other real estate construction [Member]
Impaired Financing Receivables
Unpaid Principal Balance	4,166		4,166		4,016
Recorded Investment With No Allowance	2,712		2,712		2,644
Recorded Investment With Allowance	1,452		1,452		1,370
Related Allowance	164		164		107
Average Recorded Investment	4,168	6,749	4,112	8,456
Interest Income	55	48	180	79
Real estate 1-4 family construction [Member]
Impaired Financing Receivables
Unpaid Principal Balance	720		720		1,095
Recorded Investment With No Allowance	617		617		501
Recorded Investment With Allowance	103		103		594
Related Allowance	103		103		202
Average Recorded Investment	1,014	1,490	1,124	1,347
Interest Income	15	31	31	57
Real estate-residential [Member]
Impaired Financing Receivables
Unpaid Principal Balance	12,696		12,696		11,877
Recorded Investment With No Allowance	7,235		7,235		7,231
Recorded Investment With Allowance	5,461		5,461		4,646
Related Allowance	1,007		1,007		1,001
Average Recorded Investment	12,680	10,522	12,261	9,947
Interest Income	166	43	477	368
Home equity [Member]
Impaired Financing Receivables
Unpaid Principal Balance	1,405		1,405		993
Recorded Investment With No Allowance	885		885		753
Recorded Investment With Allowance	520		520		240
Related Allowance	180		180		124
Average Recorded Investment	1,333	1,435	1,244	1,348
Interest Income	18	24	42	46
Consumer loans [Member]
Impaired Financing Receivables
Unpaid Principal Balance	328		328		242
Recorded Investment With No Allowance	57		57		49
Recorded Investment With Allowance	271		271		193
Related Allowance	138		138		119
Average Recorded Investment	343	321	332	297
Interest Income	4	4	14	14
Other loans [Member]
Impaired Financing Receivables
Unpaid Principal Balance
Recorded Investment With No Allowance
Recorded Investment With Allowance
Related Allowance
Average Recorded Investment
Interest Income

XML

Per Share Data (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Computation of basic and dilutive earnings per share
Weighted average number of common shares outstanding	7,524,075	7,593,929	7,524,175	7,593,929
Effect of ESOP shares	(169,607)	(128,959)	(126,945)	(121,518)
Adjusted weighted average number of common shares used in computing basic net income per common share	7,354,468	7,464,970	7,397,130	7,472,411
Effect of dilutive stock options
Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per common share	7,354,468	7,464,970	7,397,130	7,472,411

XML

Fair Values of Financial Instruments and Interest Rate Risk (Tables)

9 Months Ended

Sep. 30, 2012

Fair Values of Financial Instruments and Interest Rate Risk [Abstract]

Comparison of carrying amounts and the estimated fair value of the financial instruments

The following table reflects a comparison of carrying amounts and the estimated fair value of the financial instruments as of September 30, 2012 and December 31, 2011:

	Carrying		Estimated
September 30, 2012	Value		Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	26,197	$	26,197	$	26,197	$	—	$	—
Securities available for sale		130,274		130,274		35,040		95,234		—
Loans held for investment, net		332,460		341,994		—		—		341,994
Loans held for sale		1,025		1,025		—		1,025		—
Restricted stock		2,265		2,265		2,265		—		—
Bank-owned life insurance		6,354		6,354		—		—		6,354
Mortgage servicing rights		2,404		2,512		—		—		2,512
Accrued interest receivable		1,935		1,935		—		—		1,935
FINANCIAL LIABILITIES
Deposits	$	450,400	$	452,034	$	—	$	—	$	452,034
Short-term borrowings		20,635		20,635		—		20,635		—
Long-term borrowings		1,549		1,788		—		1,788		—
Junior subordinated debt		11,127		11,272		—		—		11,272
Accrued interest payable		277		277		—		—		277

	Carrying		Estimated
December 31, 2011	Value		Fair Value
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	28,687	$	28,687
Securities available for sale		88,661		88,661
Loans held for investment, net		359,860		374,636
Loans held for sale		1,958		1,958
Restricted stock		3,289		3,289
Bank-owned life insurance		6,171		6,171
Mortgage servicing rights		2,128		2,494
Accrued interest receivable		2,084		2,084
FINANCIAL LIABILITIES
Deposits	$	431,338	$	430,641
Short-term borrowings		20,791		20,791
Long-term borrowings		14,106		14,611
Junior subordinated debt		11,127		11,283
Accrued interest payable		301		301

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Allowance for Loan Losses (Details Textual)	9 Months Ended
	Sep. 30, 2012
Allowance For Loan Losses (Textual) [Abstract]
Financing receivable recorded investment number of days past due	90 days

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Per Share Data (Details Textual)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Per Share Data (Textual) [Abstract]
Stock outstanding options not included in the computation of EPS	122,341	123,570

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Investment Securities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Carrying amounts and fair values of securities available for sale
Amortized Cost	$ 126,565	$ 85,302
Gross Unrealized Gains	3,862	3,444
Gross Unrealized Losses	153	85
Fair Value	130,274	88,661
U.S. Treasury [Member]
Carrying amounts and fair values of securities available for sale
Amortized Cost	33,263	32,073
Gross Unrealized Gains	1,777	1,459
Fair Value	35,040	33,532
U.S. Government agencies [Member]
Carrying amounts and fair values of securities available for sale
Amortized Cost	35,484	19,142
Gross Unrealized Gains	937	855
Gross Unrealized Losses	14
Fair Value	36,407	19,997
GSE-Mortgage-backed securities and CMO's [Member]
Carrying amounts and fair values of securities available for sale
Amortized Cost	49,636	24,016
Gross Unrealized Gains	393	332
Gross Unrealized Losses	139	85
Fair Value	49,890	24,263
State and political subdivisions [Member]
Carrying amounts and fair values of securities available for sale
Amortized Cost	8,182	10,071
Gross Unrealized Gains	755	798
Fair Value	$ 8,937	$ 10,869

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities
Net income	$ 1,363	$ 1,173
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	718	615
Net amortization of security premiums/discounts	907	603
Net amortization of mortgage servicing rights	609	416
Impairment of foreclosed real estate	988	31
Impairment of other assets	50
Provision for loan losses	1,094	2,012
Stock compensation	3	4
Net realized gains on sales / calls of available for sales securities	(16)	(933)
Income from mortgage loan sales	(2,578)	(1,121)
Proceeds from sales of loans held for sale	89,969	42,793
Origination of loans held for sale	(86,458)	(37,173)
(Gain) loss on sale of premises, equipment and other assets	(276)	13
Increase in cash surrender value of life insurance	(183)	(144)
Loss on sales of foreclosed real estate	60	43
Release of ESOP shares	35	60
Net change in interest receivable	149	490
Net change in other assets	137	(751)
Net change in interest payable	(24)	(35)
Net change in other liabilities	873	619
Net cash provided by operating activities	7,420	8,715
Cash flows from investing activities
Proceeds from sales, maturities and calls of securities available for sale	19,215	35,497
Purchase of securities available for sale	(61,369)	(28,020)
Net change in loans	24,845	(3,999)
Purchase of premises and equipment	(610)	(1,147)
Proceeds from sales of foreclosed real estate	1,724	577
Investment in other assets	(260)	(185)
Net decrease in restricted stock	1,024	511
Net cash provided by investing activities	(15,431)	3,234
Cash flows from financing activities
Net increase (decrease) in deposit accounts	19,062	(9,864)
Net increase (decrease) in short-term borrowed funds	(156)	9,598
Net decrease in long-term debt	(12,557)	(11,533)
Proceeds from issuance of new junior subordinated debt		4,438
Repayment of junior subordinated debt		(730)
Repurchase of common stock Value	(243)
Increase in ESOP notes receivable	(176)	(94)
Dividends on preferred stock	(409)	(409)
Net cash used in financing activities	5,521	(8,594)
Increase (decrease) in cash and cash equivalents	(2,490)	3,355
Cash and cash equivalents, beginning of period	28,687	13,624
Cash and cash equivalents, end of period	26,197	16,979
Supplemental Disclosures of Cash Flow Information
Interest paid	2,846	3,731
Income taxes paid	78	216
Supplemental Schedule of Non-Cash Activities
Net change in fair-value of securities available for sale, net of tax	230	7,527
Loans transferred to foreclosed real estate	1,649	1,670
Company financed sales of other real estate owned	$ (188)

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Investment Securities (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Sales of securities available for sale
Gross proceeds from sales			$ 8,996	$ 25,568
Realized gains from sales			128	933
Realized losses from sales			(112)
Net Realized gains			$ 16	$ 933

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Allowance for Loan Losses (Details 3) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Composition of nonaccrual loans by class
Financing receivable recorded investment 90 days past due and nonaccrual	$ 8,617	$ 7,862
Commercial [Member]
Composition of nonaccrual loans by class
Financing receivable recorded investment 90 days past due and nonaccrual	37	329
Real estate-commercial [Member]
Composition of nonaccrual loans by class
Financing receivable recorded investment 90 days past due and nonaccrual	2,235	2,742
Other real estate construction [Member]
Composition of nonaccrual loans by class
Financing receivable recorded investment 90 days past due and nonaccrual	3,193	2,084
Real estate 1-4 family construction [Member]
Composition of nonaccrual loans by class
Financing receivable recorded investment 90 days past due and nonaccrual
Real estate-residential [Member]
Composition of nonaccrual loans by class
Financing receivable recorded investment 90 days past due and nonaccrual	2,845	2,441
Home equity [Member]
Composition of nonaccrual loans by class
Financing receivable recorded investment 90 days past due and nonaccrual	306	255
Consumer loans [Member]
Composition of nonaccrual loans by class
Financing receivable recorded investment 90 days past due and nonaccrual	1	11
Other loans [Member]
Composition of nonaccrual loans by class
Financing receivable recorded investment 90 days past due and nonaccrual

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Fair Values of Financial Instruments and Interest Rate Risk (Details Textual)	9 Months Ended
	Sep. 30, 2012
Fair Values of Financial Instruments and Interest Rate Risk (Textual) [Abstract]
Short term borrowings due period	Within one year

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
ASSETS
Cash and due from banks	$ 6,766	$ 7,487	[1]
Interest-earning deposits with banks	19,431	21,200	[1]
Securities available for sale, at fair value	130,274	88,661	[1]
Loans held for sale	1,025	1,958	[1]
Loans:
Loans held for investment	339,343	366,675	[1]
Less allowance for loan losses	(6,883)	(6,815)	[1]
Net loans held for investment	332,460	359,860	[1]
Premises and equipment, net	14,968	15,076	[1]
Interest receivable	1,935	2,084	[1]
Restricted stock	2,265	3,289	[1]
Bank owned life insurance	6,354	6,171	[1]
Goodwill	987	987	[1]
Other real estate owned	8,947	10,258	[1]
Prepaid assets	928	1,347	[1]
Other assets	8,563	8,524	[1]
Total assets	534,903	526,902	[1]
Deposits:
Demand noninterest-bearing	66,630	62,339	[1]
Interest checking and money market accounts	203,098	185,539	[1]
Savings deposits	43,392	39,273	[1]
Time deposits, $100,000 and over	55,746	58,274	[1]
Other time deposits	81,534	85,913	[1]
Total deposits	450,400	431,338	[1]
Short-term borrowed funds	20,635	20,791	[1]
Long-term debt	12,676	25,233	[1]
Interest payable	277	301	[1]
Other liabilities	4,509	3,636	[1]
Total liabilities	488,497	481,299	[1]
Off balance sheet items, commitments and contingencies (Note 8)			[1]
SHAREHOLDERS' EQUITY
Discount on preferred stock	(125)	(200)	[1]
Common stock, $1.25 par value: 20,000,000 shares authorized; issued and outstanding 7,522,902 and 7,593,929 shares, respectively	9,404	9,492	[1]
Additional paid-in capital plus stock option surplus	13,828	14,010	[1]
Unearned ESOP compensation	(883)	(772)	[1]
Undivided profits	11,258	10,379	[1]
Accumulated other comprehensive income	2,424	2,194	[1]
Total shareholders' equity	46,406	45,603	[1]
Total liabilities and shareholders' equity	534,903	526,902	[1]
Preferred Stock Series A
SHAREHOLDERS' EQUITY
Preferred stock, no par value: 10,000,000 shares authorized; 10,000 shares of series A and 500 shares of series B issued and outstanding	10,000	10,000	[1]
Preferred Stock Series B
SHAREHOLDERS' EQUITY
Preferred stock, no par value: 10,000,000 shares authorized; 10,000 shares of series A and 500 shares of series B issued and outstanding	$ 500	$ 500	[1]

[1] Derived from audited consolidated financial statements

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Troubled Debts Restructures (Details) (Other [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2012 Contract	Sep. 30, 2012 Contract
Breakdown of the types of concessions made by loan class
Number of Contracts	8	14
Pre-Modification Outstanding Recorded Investment	$ 361	$ 1,135
Post-Modification Outstanding Recorded Investment	361	611
Commercial [Member]
Breakdown of the types of concessions made by loan class
Number of Contracts	1	3
Pre-Modification Outstanding Recorded Investment	33	111
Post-Modification Outstanding Recorded Investment	33	101
Real estate-commercial [Member]
Breakdown of the types of concessions made by loan class
Number of Contracts		2
Pre-Modification Outstanding Recorded Investment		619
Post-Modification Outstanding Recorded Investment		113
Other real estate construction [Member]
Breakdown of the types of concessions made by loan class
Number of Contracts	1	1
Pre-Modification Outstanding Recorded Investment	49	49
Post-Modification Outstanding Recorded Investment	49	49
Real estate 1-4 family construction [Member]
Breakdown of the types of concessions made by loan class
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Real estate-residential [Member]
Breakdown of the types of concessions made by loan class
Number of Contracts	4	5
Pre-Modification Outstanding Recorded Investment	217	242
Post-Modification Outstanding Recorded Investment	217	240
Home equity [Member]
Breakdown of the types of concessions made by loan class
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Consumer loans [Member]
Breakdown of the types of concessions made by loan class
Number of Contracts	2	3
Pre-Modification Outstanding Recorded Investment	62	114
Post-Modification Outstanding Recorded Investment	62	108
Other loans [Member]
Breakdown of the types of concessions made by loan class
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment

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Consolidated Statement of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Consolidated Statement of Comprehensive Income [Abstract]
Net income	$ 262	$ 255	$ 1,363	$ 1,173
Other comprehensive income
Unrealized gain on available for sale securities	414	2,332	366	3,477
Related tax effect	(143)	(808)	(126)	(1,234)
Reclassification of (gain) loss recognized in net income			(16)	(933)
Related tax effect			6	360
Total other comprehensive income	271	1,524	230	1,670
Comprehensive income	$ 533	$ 1,779	$ 1,593	$ 2,843

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Investment Securities (Details Textual) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Investment Securities (Textual) [Abstract]
Federal Reserve stock owned by Company	$ 802,850	$ 802,850
Federal Home Loan Bank Stock owned by Company	1,500,000	2,500,000
Securities available for sale pledged as collateral on public deposits	$ 46,400,000	$ 37,700,000
Yields on securities and investments tax rate	38.55%

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2012

Investment Securities [Abstract]

Carrying amounts and fair values of securities available for sale

Carrying amounts and fair values of securities available for sale are summarized below:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
September 30, 2012	Cost		Gains		Losses		Value
	(dollars in thousands)
U.S. Treasury	$	33,263	$	1,777	$	—	$	35,040
U.S. Government agencies		35,484		937		14		36,407
GSE - Mortgage-backed securities and CMO’s		49,636		393		139		49,890
State and political subdivisions		8,182		755		—		8,937
Total securities available for sale	$	126,565	$	3,862	$	153	$	130,274
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2011	Cost		Gains		Losses		Value
	(dollars in thousands)
U.S. Treasury	$	32,073	$	1,459	$	—	$	33,532
U.S. Government agencies		19,142		855		—		19,997
GSE - Mortgage-backed securities and CMO’s		24,016		332		85		24,263
State and political subdivisions		10,071		798		—		10,869
Total securities available for sale	$	85,302	$	3,444	$	85	$	88,661

Sales of securities available for sale

Results from sales of securities available for sale for the three and nine month period ended September 30, 2012 and September 30, 2011 are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012			2011
	(dollars in thousands)
Gross proceeds from sales	$	—	$	—	$	8,996		$	25,568
Realized gains from sales	$	—	$	—	$	128		$	933
Realized losses from sales		—		—		(112	)		—
Net Realized gains	$	—	$	—	$	16		$	933

Gross unrealized losses and fair value of investments

The following tables show the gross unrealized losses and fair value of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2012 and December 31, 2011. These unrealized losses on investment securities are a result of temporary fluctuations in the market prices due to a rise in interest rates, which will adjust if rates decline, and a volatile market and are in no way a reflection of the quality of the investments. At September 30, 2012, the unrealized losses related to one government agency bond and seven mortgage backed securities. At December 31, 2011, the unrealized losses related to three mortgage backed securities.

	Less than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
September 30, 2012	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(dollars in thousands)
Securities available for sale temporary impairment
U.S. Government agencies	$	2,807	$	14	$	—	$	—	$	2,807	$	14
GSE - Mortgage-backed securities and CMO’s		23,902		139		—		—		23,902		139
	$	26,709	$	153	$	—	$	—	$	26,709	$	153
	Less than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
December 31, 2011	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(dollars in thousands)
Securities available for sale temporary impairment
GSE - Mortgage-backed securities and CMO’s	$	9,734	$	85	$	—	$	—	$	9,734	$	85
	$	9,734	$	85	$	—	$	—	$	9,734	$	85

Amortized cost and fair value of the available for sale securities portfolio

The aggregate amortized cost and fair value of the available for sale securities portfolio at September 30, 2012 by remaining contractual maturity are as follows:

	September 30, 2012
	Amortized		Estimated		Book
Securities available for sale	Cost		Fair Value		Yield (1)
U. S. Treasury
Due after one but within five years		16,290		17,210		1.90	%
Due after five but within ten years		16,973		17,830		1.76	%
		33,263		35,040		1.83	%
U.S. Government agencies
Due after one but within five years		26,648		27,479		1.84	%
Due after five but within ten years		8,836		8,928		1.43	%
		35,484		36,407		1.73	%
Mortgage-backed securities
Due after five but within ten years		7,008		7,141		3.50	%
Due after ten years		42,628		42,749		2.89	%
		49,636		49,890		2.98	%
State and political subdivisions
Due within twelve months		351		354		3.63	%
Due after one but within five years		1,562		1,648		3.51	%
Due after five but within ten years		4,771		5,296		3.10	%
Due after ten years		1,498		1,639		4.12	%
		8,182		8,937		3.39	%
Total Securities available for sale
Due within twelve months		351		354		3.63	%
Due after one but within five years		44,500		46,337		1.92	%
Due after five but within ten years		37,588		39,195		2.18	%
Due after ten years		44,126		44,388		2.93	%
	$	126,565	$	130,274		2.35	%

1) Yields on securities and investments exempt from federal and/or state income taxes are stated on a fully tax- equivalent basis, assuming a 38.55% tax rate.

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Loans Held for Investment (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Composition of net loans held for investment by class
Loans, Total	$ 339,257	$ 366,567
Less:
Less allowance for loan losses	(6,883)	(6,815)	[1]
Deferred loan (fees) costs, net	86	108
Loans held for investment, net	332,460	359,860	[1]
Commercial Loan [Member] | Commercial [Member]
Composition of net loans held for investment by class
Loans, Total	41,628	45,907
Real estate-commercial [Member] | Commercial [Member]
Composition of net loans held for investment by class
Loans, Total	106,628	114,944
Other real estate construction loans [Member] | Commercial [Member]
Composition of net loans held for investment by class
Loans, Total	26,379	31,601
Real estate 1-4 family construction [Member] | Noncommercial [Member]
Composition of net loans held for investment by class
Loans, Total	2,827	5,543
Real estate-residential [Member] | Noncommercial [Member]
Composition of net loans held for investment by class
Loans, Total	97,286	101,847
Home equity [Member] | Noncommercial [Member]
Composition of net loans held for investment by class
Loans, Total	50,432	51,413
Consumer loans [Member] | Noncommercial [Member]
Composition of net loans held for investment by class
Loans, Total	13,309	14,710
Other loans [Member] | Noncommercial [Member]
Composition of net loans held for investment by class
Loans, Total	$ 768	$ 602

[1] Derived from audited consolidated financial statements

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Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2012

Allowance for Loan Losses [Abstract]

Changes in the allowance for loan losses

The following table shows the change in the allowance for loss losses by loan segment for the three and nine month periods ended September 30, 2012 and 2011, respectively:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Commercial	2012			2011			2012			2011
	(dollars in thousands)
Balance, beginning of period	$	2,650		$	3,662		$	2,904		$	5,363
Provision (recovery) charged to operations		424			370			476			1,184
Charge-offs		(367	)		(1	)		(721	)		(2,520	)
Recoveries		5			4			53			8
Net (charge-offs)		(362	)		3			(668	)		(2,512	)
Balance at end of period	$	2,712		$	4,035		$	2,712		$	4,035
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Non-Commercial	2012			2011			2012			2011
	(dollars in thousands)
Balance, beginning of period	$	4,419		$	3,612		$	3,911		$	3,704
Provision (recovery) charged to operations		(33	)		113			618			828
Charge-offs		(229	)		(118	)		(400	)		(994	)
Recoveries		14			24			42			93
Net (charge-offs)		(215	)		(94	)		(358	)		(901	)
Balance at end of period	$	4,171		$	3,631		$	4,171		$	3,631

Schedule of loans and reserve balances by loan class both individually and collectively evaluated for impairment

The following table shows period-end loans and reserve balances by loan segment both individually and collectively evaluated for impairment at September 30, 2012 and December 31, 2011:

	Individually Evaluated				Collectively Evaluated				Total
September 30, 2012	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,240	$	17,308	$	1,472	$	157,777	$	2,712	$	175,085
Non-Commercial		1,428		15,149		2,743		149,023		4,171		164,172
Total	$	2,668	$	32,457	$	4,215	$	306,800	$	6,883	$	339,257
	Individually Evaluated				Collectively Evaluated				Total
December 31, 2011	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,137	$	18,882	$	1,767	$	173,570	$	2,904	$	192,452
Non-Commercial		1,446		14,207		2,465		159,908		3,911		174,115
Total	$	2,583	$	33,089	$	4,232	$	333,478	$	6,815	$	366,567

Past due information of the loan portfolio by class

Past due loan information is used by management when assessing the adequacy of the allowance for loan losses. The following table summarizes the past due information of the loan portfolio by class:

			Loans								Accruing
	Loans		90 Days								Loans 90 or
	30-89 Days		or More		Total Past		Current		Total		More Days
September 30, 2012	Past Due		Past due		Due Loans		Loans		Loans		Past Due
	(dollars in thousands)
Commercial	$	428	$	37	$	465	$	41,163	$	41,628	$	—
Real estate - commercial		629		2,235		2,864		103,764		106,628		—
Other real estate construction		250		3,193		3,443		22,936		26,379		—
Real estate 1 -4 family construction		—		—		—		2,827		2,827		—
Real estate - residential		1,549		2,845		4,394		92,892		97,286		—
Home equity		690		306		996		49,436		50,432		—
Consumer loans		203		1		204		13,105		13,309		—
Other loans		—		—		—		768		768		—
Total	$	3,749	$	8,617	$	12,366	$	326,891	$	339,257	$	—
			Loans								Accruing
	Loans		90 Days								Loans 90 or
	30-89 Days		or More		Total Past		Current		Total		More Days
December 31, 2011	Past Due		Past due		Due Loans		Loans		Loans		Past Due
	(dollars in thousands)
Commercial	$	212	$	329	$	541	$	45,366	$	45,907	$	—
Real estate - commercial		2,396		2,742		5,138		109,806		114,944		—
Other real estate construction		358		2,084		2,442		29,159		31,601		—
Real estate construction		—		—		—		5,543		5,543		—
Real estate - residential		2,341		2,441		4,782		97,065		101,847		—
Home equity		298		255		553		50,860		51,413		—
Consumer loan		208		11		219		14,491		14,710		—
Other loans		—		—		—		602		602		—
Total	$	5,813	$	7,862	$	13,675	$	352,892	$	366,567	$	—

Composition of nonaccrual loans by class

The composition of nonaccrual loans by class as of September 30, 2012 and December 31, 2011 is as follows:

	September 30,		December 31,
	2012		2011
	(dollars in thousands)
Commercial	$	37	$	329
Real estate - commercial		2,235		2,742
Other real estate construction		3,193		2,084
Real estate 1 – 4 family construction		—		—
Real estate – residential		2,845		2,441
Home equity		306		255
Consumer loans		1		11
Other loans		—		—
	$	8,617	$	7,862

Summary of risk grades of portfolio by class

The tables below summarize risk grades of the loan portfolio by class at September 30, 2012 and December 31 2011:

					Sub-
September 30, 2012	Pass		Watch		standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	39,828	$	1,113	$	687	$	—	$	41,628
Real estate - commercial		88,921		8,469		9,238		—		106,628
Other real estate construction		21,279		480		4,620		—		26,379
Real estate 1 - 4 family construction		2,827		—		—		—		2,827
Real estate - residential		81,621		7,613		8,052		—		97,286
Home equity		48,481		702		1,249		—		50,432
Consumer loans		12,617		493		199		—		13,309
Other loans		768		—		—		—		768
Total	$	296,342	$	18,870	$	24,045	$	—	$	339,257
					Sub-
December 31, 2011	Pass		Watch		standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	42,892	$	1,670	$	1,345	$	—	$	45,907
Real estate - commercial		95,699		7,971		11,274		—		114,944
Other real estate construction		26,256		745		4,600		—		31,601
Real estate 1 - 4 family construction		5,538		5		—		—		5,543
Real estate - residential		89,209		4,269		8,369		—		101,847
Home equity		49,743		861		809		—		51,413
Consumer loans		13,970		332		408		—		14,710
Other loans		602		—		—		—		602
Total	$	323,909	$	15,853	$	26,805	$	—	$	366,567

Summary of performing and nonperforming loans by class

Loans that are in nonaccrual status or 90 days past due and still accruing are considered to be nonperforming. The following tables show the breakdown between performing and nonperforming loans by class at September 30, 2012 and December 31, 2011:

			Non-
September 30, 2012	Performing		Performing		Total
	(dollars in thousands)
Commercial	$	41,591	$	37	$	41,628
Real estate - commercial		104,393		2,235		106,628
Other real estate construction		23,186		3,193		26,379
Real estate 1 – 4 family construction		2,827		—		2,827
Real estate – residential		94,441		2,845		97,286
Home equity		50,126		306		50,432
Consumer loans		13,308		1		13,309
Other loans		768		—		768
Total	$	330,640	$	8,617	$	339,257
			Non-
December 31, 2011	Performing		Performing		Total
	(dollars in thousands)
Commercial	$	45,578	$	329	$	45,907
Real estate - commercial		112,202		2,742		114,944
Other real estate construction		29,517		2,084		31,601
Real estate 1 – 4 family construction		5,543		—		5,543
Real estate – residential		99,406		2,441		101,847
Home equity		51,158		255		51,413
Consumer loans		14,699		11		14,710
Other loans		602		—		602
Total	$	358,705	$	7,862	$	366,567

Summary of loans deemed impaired and specific reserves allocated by class

The tables below summarize the loans deemed impaired and the amount of specific reserves allocated by class at September 30, 2012 and December 31, 2011:

			Recorded		Recorded
	Unpaid		Investment		Investment
	Principal		With No		With		Related
September 30, 2012	Balance		Allowance		Allowance		Allowance
	(dollars in thousands)
Commercial	$	1,221	$	765	$	337	$	247
Real estate - commercial		14,105		8,073		3,969		829
Other real estate construction		4,166		2,712		1,452		164
Real estate 1 -4 family construction		720		617		103		103
Real estate - residential		12,696		7,235		5,461		1,007
Home equity		1,405		885		520		180
Consumer loans		328		57		271		138
Other loans		—		—		—		—
Total	$	34,641	$	20,344	$	12,113	$	2,668

			Recorded		Recorded
	Unpaid		Investment		Investment
	Principal		With No		With		Related
December 31, 2011	Balance		Allowance		Allowance		Allowance
	(dollars in thousands)
Commercial	$	2,099	$	889	$	1,091	$	578
Real estate - commercial		14,951		11,365		1,523		452
Other real estate construction		4,016		2,644		1,370		107
Real estate 1 -4 family construction		1,095		501		594		202
Real estate - residential		11,877		7,231		4,646		1,001
Home equity		993		753		240		124
Consumer loans		242		49		193		119
Other loans		—		—		—		—
Total	$	35,273	$	23,432	$	9,657	$	2,583

	Three Months ended				Three Months ended
	September 30, 2012				September 30, 2011
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Income		Investment		Income
	(dollars in thousands)
Commercial	$	1,112	$	23	$	1,912	$	32
Real estate - commercial		12,245		153		12,496		167
Other real estate construction		4,168		55		6,749		48
Real estate 1 -4 family construction		1,014		15		1,490		31
Real estate - residential		12,680		166		10,522		43
Home equity		1,333		18		1,435		24
Consumer loans		343		4		321		4
Other loans		—		—		—		—
Total	$	32,895	$	434	$	34,925	$	349

	Nine Months ended				Nine Months ended
	September 30, 2012				September 30, 2011
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Income		Investment		Income
	(dollars in thousands)
Commercial	$	1,301	$	50	$	1,529	$	75
Real estate - commercial		12,397		493		16,162		430
Other real estate construction		4,112		180		8,456		79
Real estate 1 -4 family construction		1,124		31		1,347		57
Real estate - residential		12,261		477		9,947		368
Home equity		1,244		42		1,348		46
Consumer loans		332		14		297		14
Other loans		—		—		—		—
Total	$	32,771	$	1,287	$	39,086	$	1,069

XML

Consolidated Statement of Changes in Shareholders' Equity (Unaudited) (USD $) In Thousands, except Share data	Total USD ($)		Number Common Shares Issued	Preferred Stock Series A	Preferred Stock Series B	Discount on Preferred Stock USD ($)	Common Stock USD ($)	Additional Paid-In Capital USD ($)	Unearned ESOP Compensation USD ($)	Undivided Profits USD ($)		Accumulated Other Comprehensive Income ( Loss) USD ($)
Beginning balance at Dec. 31, 2011	$ 45,603	[1]				$ (200)		$ 14,010	$ (772)	$ 10,379		$ 2,194
Beginning balance, shares at Dec. 31, 2011	7,593,929	[1]	7,593,929	10,000	500		9,492
Net income	1,363									1,363
Repurchase of common stock Shares			(69,854)
Repurchase of common stock Value	(243)						(87)	(156)
Retirement of common Stock Shares			(1,173)
Retirement of common Stock, Value							(1)	1
Other comprehensive loss	230											230
Release of ESOP shares	35							(30)	65
Increase in ESOP notes receivable	(176)								(176)
Increase in ESOP notes receivable	3							3
Stock compensation expense	3
Record preferred stock dividend and discount accretion	(409)					75				(484)
Ending balance at Sep. 30, 2012	$ 46,406					$ (125)		$ 13,828	$ (883)	$ 11,258	[1]	$ 2,424
Ending balance, shares at Sep. 30, 2012	7,522,902		7,522,902	10,000	500		9,404

[1] Derived from audited consolidated financial statements

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Preferred stock, par value			[1]
Preferred stock, shares authorized	10,000,000	10,000,000	[1]
Common stock, par value	$ 1.25	$ 1.25	[1]
Common stock, shares authorized	20,000,000	20,000,000	[1]
Common stock, shares issued	7,522,902	7,593,929	[1]
Common stock, shares outstanding	7,522,902	7,593,929	[1]
Preferred Stock Series A
Preferred stock, shares issued	10,000	10,000	[1]
Preferred stock, shares outstanding	10,000	10,000	[1]
Preferred Stock Series B
Preferred stock, shares issued	500	500	[1]
Preferred stock, shares outstanding	500	500	[1]

[1] Derived from audited consolidated financial statements

XML

Fair Value Disclosures

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures

Note 9 – Fair Value Disclosures

Accounting Standards Codification (ASC) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.

ASC 820 defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which those assets or liabilities are sold and considers assumptions that market participants would use when pricing those assets or liabilities. Fair values determined using Level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based on Level 2 inputs, which exist when observable data exists for similar assets and liabilities. Fair values for assets and liabilities for which identical or similar assets and liabilities are not actively traded in observable markets are based on Level 3 inputs, which are considered to be unobservable.

Among the Company’s assets and liabilities, investment securities available for sale are reported at their fair values on a recurring basis. Certain other assets are adjusted to their fair value on a nonrecurring basis, including other real estate owned, impaired loans, loans held for sale, which are carried at the lower of cost or market; loan servicing rights, where fair value is determined using similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions; and goodwill, which is periodically tested for impairment. Deposits, short-term borrowings and long-term obligations are not reported at fair value.

Prices for US Treasury securities are readily available in the active markets in which those securities are traded, and the resulting fair values are shown in the ‘Level 1 input’ column. Prices for government agency securities, mortgage-backed securities and for state, county and municipal securities are obtained for similar securities, and the resulting fair values are shown in the ‘Level 2 input’ column. Prices for all other non-marketable investments are determined based on various assumptions that are not observable. The fair values for these investment securities are shown in the ‘Level 3 input’ column. Non-marketable investment securities, which are carried at their purchase price, include those that may only be redeemed by the issuer. The changes in securities between Level 1 and Level 2 were related to the purchase and sale of several securities and not the transfer of securities.

The Company does not record loans at fair value on a recurring basis. 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 measures impairment by using one of several methods including collateral value, fair value of similar debt and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the present value of the expected repayments or fair value of collateral exceed the recorded investments in such loans. At September 30, 2012, substantially all of the total impaired loans were evaluated based on the fair value of the underlying collateral. 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 internal assessment of fair value based upon market data issued or management determines the fair value of the underlying collateral is further impaired below the appraised value, the Company records the impaired loan as nonrecurring Level 3.

Foreclosed assets are adjusted to fair value upon transfer of the loans to other real estate owned. Real estate acquired in settlement of loans is recorded initially at estimated fair value of the property less estimated selling costs at the date of foreclosure. The initial recorded value may be subsequently reduced by additional allowances, which are charged to earnings if the estimated fair value of the property less estimated selling costs declines below the initial recorded value. 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 foreclosed asset as nonrecurring Level 2. When an internal assessment of fair value based upon market data issued or management determines the fair value of the underlying collateral is further impaired below the appraised value, the Company records the impaired loan as nonrecurring Level 3.

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate, based on secondary market prices. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Servicing assets are evaluated for impairment based upon the fair value. Fair value is determined based upon discounted cash flows using market-based assumptions.

The following table provides fair value information for assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011:

	September 30, 2012
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	35,040	$	35,040	$	—	$	—
US Government Agencies		36,407		—		36,407		—
GSE - Mortgage-backed securities and CMO’s		49,890		—		49,890		—
State and political subdivisions		8,937		—		8,937		—
Total assets at fair value	$	130,274	$	35,040	$	95,234	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

	December 31, 2011
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	33,532	$	33,532	$	—	$	—
US Gov’t		19,997		—		19,997		—
Mortgage-backed securities and CMO’s		24,263		—		24,263		—
State and political subdivisions		10,869		—		10,869		—
Total assets at fair value	$	88,661	$	33,532	$	55,129	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of September 30, 2012 and December 31, 2011:

	September 30, 2012
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	9,445	$	—	$	—	$	9,445
Loans held for sale		1,025		—		1,025		—
Other real estate owned		6,011		—		—		6,011
Total assets at fair value	$	16,481	$	—	$	1,025	$	15,456
Total liabilities at fair value	$	—	$	—	$	—	$	—
	December 31, 2011
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	7,074	$	—	$	—	$	7,074
Loans held for sale		1,958		—		1,958		—
Other real estate owned		1,464		—		—		1,464
Total assets at fair value	$	10,496	$	—	$	1,958	$	8,538
Total liabilities at fair value	$	—	$	—	$	—	$	—

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 05, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	UWHARRIE CAPITAL CORP
Entity Central Index Key	0000898171
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		7,522,902

XML

Fair Values of Financial Instruments and Interest Rate Risk

9 Months Ended

Sep. 30, 2012

Fair Values of Financial Instruments and Interest Rate Risk [Abstract]

Fair Values of Financial Instruments and Interest Rate Risk

Note 10 - Fair Values of Financial Instruments and Interest Rate Risk

ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring basis or non-recurring basis.

The fair value estimates presented at September 30, 2012 and December 31, 2011, are based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price an asset could be sold at or the price a liability could be settled for. However, given there is no active market or observable market transactions for many of the Company’s financial instruments, the Company has made estimates of many of these fair values which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. The estimated fair values disclosed in the following table do not represent market values of all assets and liabilities of the Company and should not be interpreted to represent the underlying value of the Company. The following table reflects a comparison of carrying amounts and the estimated fair value of the financial instruments as of September 30, 2012 and December 31, 2011:

	Carrying		Estimated
September 30, 2012	Value		Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	26,197	$	26,197	$	26,197	$	—	$	—
Securities available for sale		130,274		130,274		35,040		95,234		—
Loans held for investment, net		332,460		341,994		—		—		341,994
Loans held for sale		1,025		1,025		—		1,025		—
Restricted stock		2,265		2,265		2,265		—		—
Bank-owned life insurance		6,354		6,354		—		—		6,354
Mortgage servicing rights		2,404		2,512		—		—		2,512
Accrued interest receivable		1,935		1,935		—		—		1,935
FINANCIAL LIABILITIES
Deposits	$	450,400	$	452,034	$	—	$	—	$	452,034
Short-term borrowings		20,635		20,635		—		20,635		—
Long-term borrowings		1,549		1,788		—		1,788		—
Junior subordinated debt		11,127		11,272		—		—		11,272
Accrued interest payable		277		277		—		—		277

	Carrying		Estimated
December 31, 2011	Value		Fair Value
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	28,687	$	28,687
Securities available for sale		88,661		88,661
Loans held for investment, net		359,860		374,636
Loans held for sale		1,958		1,958
Restricted stock		3,289		3,289
Bank-owned life insurance		6,171		6,171
Mortgage servicing rights		2,128		2,494
Accrued interest receivable		2,084		2,084
FINANCIAL LIABILITIES
Deposits	$	431,338	$	430,641
Short-term borrowings		20,791		20,791
Long-term borrowings		14,106		14,611
Junior subordinated debt		11,127		11,283
Accrued interest payable		301		301

The following methods and assumptions were used by the Company in estimating the fair value of financial instruments:

• Cash and cash equivalents – The carrying amount of cash and cash equivalents approximate their fair values due to the short period of time until their expected realization and are recorded in Level 1.

• Securities available for sale – Securities available for sale are carried at fair value based on quoted and observable market prices and are recorded in Levels 1 and 2. Also see discussion in note 9.

• Loans – The fair value of loans is estimated based on discounted expected cash flows using the current interest rates at which similar loans would be made and carried in level 3. Loans held for sale, which represent current mortgage production forward sales not yet delivered, are valued based on secondary market prices. The fair value of loans does not consider the lack of liquidity and uncertainty in the market that would affect the valuation. Loans held for sale are recorded in Level 2.

• Restricted stock – It is not practicable to determine fair value of restricted stock which is comprised of Federal Home Loan Bank and Federal Reserve Bank stock due to restrictions placed on its transferability and it is presented at its carrying value and is recorded in Level 1 due to the redemption provisions of the Federal Home Loan Bank and the Federal Reserve Bank.

• Bank-owned life insurance – The carrying amount of bank-owned life insurance is the current cash surrender value and is recorded in level 3.

• Mortgage serving rights – Fair value is determined based upon discounted cash flows using market-based assumptions and is recorded in Level 3.

• Accrued interest receivable and payable – Both accrued interest receivable and payable are recorded in Level 3, as there are not active markets for these.

• Deposits – The fair value of deposits is estimated based on discounted cash flow analyses using offered market rates and is recorded in Level 3. The fair value of deposits does not consider any customer related intangibles.

• Borrowings – The fair value disclosed for short-term borrowings, which are composed of overnight borrowings and debt due within one year approximate the carrying value for such debt and is recorded in Level 2. The estimated fair value for long-term borrowings are estimated based on discounted cash flow analyses using offered market rates. Total borrowings are carried in Level 2. Junior subordinated debt is fair valued based on discounted cash flow analyses and is recorded in Level 3.

At September 30, 2012, the subsidiary banks had outstanding standby letters of credit and commitments to extend credit. These off-balance sheet financial instruments are generally exercisable at the market rate prevailing at the date the underlying transaction will be completed; therefore, they were deemed to have no current fair value. See Note 8.

XML

Consolidated Statements of Income (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Interest Income
Loans, including fees	$ 4,809	$ 5,499	$ 14,957	$ 16,258
Investment securities
US Treasury	145	152	432	594
US Government agencies and corporations	375	294	768	796
State and political subdivisions	75	92	255	279
Interest-earning deposits with banks and federal funds sold	29	21	101	39
Total interest income	5,433	6,058	16,513	17,966
Interest Expense
Interest checking and money market accounts	129	202	414	645
Savings deposits	49	82	154	246
Time deposits, $100,000 and over	195	278	610	844
Other time deposits	250	282	770	883
Short-term borrowed funds	98	89	253	271
Long-term debt	180	259	621	807
Total interest expense	901	1,192	2,822	3,696
Net interest income	4,532	4,866	13,691	14,270
Provision for loan losses	391	483	1,094	2,012
Net interest income after provision for loan losses	4,141	4,383	12,597	12,258
Noninterest Income
Service charges on deposit accounts	450	476	1,318	1,369
Other service fees and commissions	801	885	2,392	2,651
Gain (loss) on sale of securities			16	933
Gain (loss) on fixed assets and other assets	(80)	(51)	216	(56)
Income from mortgage loan sales	1,102	407	2,578	1,121
Other income	107	82	345	287
Total noninterest income	2,380	1,799	6,865	6,305
Noninterest Expense
Salaries and employee benefits	3,215	3,071	9,478	9,166
Net occupancy expense	293	305	863	888
Equipment expense	185	179	556	579
Data processing costs	204	213	638	630
Office supplies and printing	93	76	245	247
Foreclosed real estate expense	547	355	1,357	480
Professional fees and services	295	414	467	1,160
Marketing and donations	146	127	484	424
Electronic banking expense	227	228	681	656
Software amortization and maintenance	140	145	423	421
FDIC insurance	173	171	518	575
Other noninterest expense	632	594	1,828	1,757
Total noninterest expense	6,150	5,878	17,538	16,983
Income before income taxes	371	304	1,924	1,580
Income taxes	109	49	561	407
Net income	262	255	1,363	1,173
Net Income	262	255	1,363	1,173
Dividends - preferred stock	(161)	(161)	(484)	(484)
Net income available to common shareholders	$ 101	$ 94	$ 879	$ 689
Net income per common share
Basic	$ 0.01	$ 0.01	$ 0.12	$ 0.09
Diluted	$ 0.01	$ 0.01	$ 0.12	$ 0.09
Weighted average shares outstanding
Basic	7,354,468	7,464,970	7,397,130	7,472,411
Diluted	7,354,468	7,464,970	7,397,130	7,472,411

XML

Investment Securities

9 Months Ended

Sep. 30, 2012

Investment Securities [Abstract]

Investment Securities

Note 4 – Investment Securities

Carrying amounts and fair values of securities available for sale are summarized below:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
September 30, 2012	Cost		Gains		Losses		Value
	(dollars in thousands)
U.S. Treasury	$	33,263	$	1,777	$	—	$	35,040
U.S. Government agencies		35,484		937		14		36,407
GSE - Mortgage-backed securities and CMO’s		49,636		393		139		49,890
State and political subdivisions		8,182		755		—		8,937
Total securities available for sale	$	126,565	$	3,862	$	153	$	130,274
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2011	Cost		Gains		Losses		Value
	(dollars in thousands)
U.S. Treasury	$	32,073	$	1,459	$	—	$	33,532
U.S. Government agencies		19,142		855		—		19,997
GSE - Mortgage-backed securities and CMO’s		24,016		332		85		24,263
State and political subdivisions		10,071		798		—		10,869
Total securities available for sale	$	85,302	$	3,444	$	85	$	88,661

At both September 30, 2012 and December 31, 2011 the Company owned Federal Reserve stock reported at cost of $802,850 and is included in other assets. Also at September 30, 2012 and December 31, 2011, the Company owned Federal Home Loan Bank Stock (FHLB) of $1.5 million and $2.5 million, respectively. The investments in Federal Reserve stock and FHLB stock are required investments related to the Company’s membership in, and borrowings, with these banks. These investments are carried at cost since there is no ready market and historically redemption has been made at par value. The Company estimated that the fair value approximated cost and that these investments were not impaired at September 30, 2012.

Results from sales of securities available for sale for the three and nine month period ended September 30, 2012 and September 30, 2011 are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012			2011
	(dollars in thousands)
Gross proceeds from sales	$	—	$	—	$	8,996		$	25,568
Realized gains from sales	$	—	$	—	$	128		$	933
Realized losses from sales		—		—		(112	)		—
Net Realized gains	$	—	$	—	$	16		$	933

At September 30, 2012 and December 31, 2011 securities available for sale with a carrying amount of $46.4 million and $37.7 million, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

The following tables show the gross unrealized losses and fair value of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2012 and December 31, 2011. These unrealized losses on investment securities are a result of temporary fluctuations in the market prices due to a rise in interest rates, which will adjust if rates decline, and a volatile market and are in no way a reflection of the quality of the investments. At September 30, 2012, the unrealized losses related to one government agency bond and seven mortgage backed securities. At December 31, 2011, the unrealized losses related to three mortgage backed securities.

	Less than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
September 30, 2012	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(dollars in thousands)
Securities available for sale temporary impairment
U.S. Government agencies	$	2,807	$	14	$	—	$	—	$	2,807	$	14
GSE - Mortgage-backed securities and CMO’s		23,902		139		—		—		23,902		139
	$	26,709	$	153	$	—	$	—	$	26,709	$	153
	Less than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
December 31, 2011	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(dollars in thousands)
Securities available for sale temporary impairment
GSE - Mortgage-backed securities and CMO’s	$	9,734	$	85	$	—	$	—	$	9,734	$	85
	$	9,734	$	85	$	—	$	—	$	9,734	$	85

Declines in the fair value of the investment portfolio are believed by management to be temporary in nature. When evaluating an investment for other-than-temporary impairment losses, management considers among other things, the length of time and the extent to which the fair value has been in a loss position, the financial condition of the issuer and the intent and the ability the Company has to hold the investment until the loss position is recovered.

Any unrealized losses were largely due to increases in market interest rates over the yields available at the time of purchase. The fair value is expected to recover as the bonds approach their maturity date or market yields for such investments decline. At September 30, 2012, the Company had no intent to sell and not more likely than not to be required to sell the available for sale securities that were in a loss position prior to full recovery

The aggregate amortized cost and fair value of the available for sale securities portfolio at September 30, 2012 by remaining contractual maturity are as follows:

	September 30, 2012
	Amortized		Estimated		Book
Securities available for sale	Cost		Fair Value		Yield (1)
U. S. Treasury
Due after one but within five years		16,290		17,210		1.90	%
Due after five but within ten years		16,973		17,830		1.76	%
		33,263		35,040		1.83	%
U.S. Government agencies
Due after one but within five years		26,648		27,479		1.84	%
Due after five but within ten years		8,836		8,928		1.43	%
		35,484		36,407		1.73	%
Mortgage-backed securities
Due after five but within ten years		7,008		7,141		3.50	%
Due after ten years		42,628		42,749		2.89	%
		49,636		49,890		2.98	%
State and political subdivisions
Due within twelve months		351		354		3.63	%
Due after one but within five years		1,562		1,648		3.51	%
Due after five but within ten years		4,771		5,296		3.10	%
Due after ten years		1,498		1,639		4.12	%
		8,182		8,937		3.39	%
Total Securities available for sale
Due within twelve months		351		354		3.63	%
Due after one but within five years		44,500		46,337		1.92	%
Due after five but within ten years		37,588		39,195		2.18	%
Due after ten years		44,126		44,388		2.93	%
	$	126,565	$	130,274		2.35	%

1) Yields on securities and investments exempt from federal and/or state income taxes are stated on a fully tax- equivalent basis, assuming a 38.55% tax rate.

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Per Share Data

9 Months Ended

Sep. 30, 2012

Per Share Data [Abstract]

Per Share Data

Note 3 – Per Share Data

Basic and diluted net income per common share is computed based on the weighted average number of shares outstanding during each period after retroactively adjusting for stock dividends. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income of the Company. For the nine months ended September 30, 2012, the Company’s 122,341 stock options outstanding did not have a dilutive effect on per share results because the exercise prices exceeded the share values for each period. The Company had 123,570 stock options outstanding at September 30, 2011 and they did not have a dilutive effect.

Basic and diluted net income per common share have been computed based upon net income available to common shareholders as presented in the accompanying consolidated statements of operations divided by the weighted average number of common shares outstanding or assumed to be outstanding. The computation of basic and dilutive earnings per share is summarized below:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Weighted average number of common shares outstanding		7,524,075			7,593,929			7,524,075			7,593,929
Effect of ESOP shares		(169,607	)		(128,959	)		(126,945	)		(121,518	)
Adjusted weighted average number of common shares used in computing basic net income per common share		7,354,468			7,464,970			7,397,130			7,472,411
Effect of dilutive stock options		—			—			—			—
Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per common share		7,354,468			7,464,970			7,397,130			7,472,411

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Loans Held for Investment (Tables)

9 Months Ended

Sep. 30, 2012

Loans Held for Investment [Abstract]

Composition of net loans held for investment by class

The composition of net loans held for investment by class as of September 30, 2012 and December 31, 2011 are as follows:

	September 30,			December 31,
	2012			2011
	(dollars in thousands)
Commercial
Commercial	$	41,628		$	45,907
Real estate - commercial		106,628			114,944
Other real estate construction loans		26,379			31,601
Noncommercial
Real estate 1-4 family construction		2,827			5,543
Real estate - residential		97,286			101,847
Home equity		50,432			51,413
Consumer loans		13,309			14,710
Other loans		768			602
		339,257			366,567
Less:
Allowance for loan losses		(6,883	)		(6,815	)
Deferred loan (fees) costs, net		86			108
Loans held for investment, net	$	332,460		$	359,860

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2012

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 11 – Recent Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurement”. The purpose of the standard is to clarify and combine fair value measurements and disclosure requirements for U.S. generally accepted accounting principles, or GAAP, and international financial reporting standards, or IFRS. The new standard provides amendments and wording changes used to describe certain requirements for measuring fair value and for disclosing information about fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2011, and should be applied prospectively to the beginning of the annual period of adoption. The adoption of this statement did not have a material impact on the consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, an update to ASC 220, “Comprehensive Income.” This update requires that all nonowner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, ASU 2011-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. ASU 2011-05 is effective for annual periods beginning after December 15, 2011, and did not have a significant impact on the Company’s financial statements.

In September 2011, the FASB issued ASU 2011-08, an update to ASC 350 “Intangibles - Goodwill and Other.” This update gives entities the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. ASU 2011-08 is effective for annual and interim impairment tests beginning after December 15, 2011, and did not have a significant impact on the Company’s financial statements.

In July 2012, the FASB issued ASU 2012-02, an update to ASC 350 “Intangibles Goodwill and Other”. The amendments in the Update are intended to reduce cost and complexity by providing an entity the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative impairment test. The Update also enhances consistency of impairment testing guidance among long-lived asset categories by permitting entities to assess qualitative factors to determine whether it is necessary to calculate the asset’s fair value when testing for impairment, which is equivalent to the impairment testing requirements for other long-lived assets. In conducting a qualitative assessment, an entity should consider the extent to which relevant circumstances and events, both individually and in the aggregate, could have affected the significant inputs used to determine the fair value of the indefinite-lived intangible asset since the last assessment. Consideration should also be given as to whether there have been changes to the carrying amount of the indefinite-lived intangible asset when evaluating whether it is more likely than not that the indefinite-lived asset is impaired. Positive and mitigating events and circumstances that could affect its determination of whether it is more likely than not that the indefinite-lived asset is impaired should also be considered. The Update is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of this update is not expected to have a significant impact on the Company’s financial statements.

In August 2012, the FASB issued ASU 2012-03: Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22. The amendments in the Update codify various amendments and corrections, and are effective upon issuance (August 27, 2012). The adoption of these changes did not have a significant impact on the Company’s financial statements.

In October 2012, the FASB issued ASU 2012-04, Technical Corrections and Improvements. The amendments in this Update cover a wide range of Topics in the Codification, related to technical corrections and improvements and conforming amendments related to fair value measurements. The amendments in this Update represent changes to clarify the Codification, correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice. Certain of the amendments are subject to transition guidance, and will be effective for public entities for fiscal periods beginning after December 15, 2012. The adoption of these changes did not have a significant impact on the Company’s financial statements.

From time to time the FASB issues exposure drafts of proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.

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Troubled Debts Restructures

9 Months Ended

Sep. 30, 2012

Troubled Debts Restructures [Abstract]

Troubled Debts Restructures

Note 7 – Troubled Debt Restructures

A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification involves providing a concession to the existing loan contract. The Company offers various types of concessions when modifying loans to troubled borrowers, however, forgiveness of principal is rarely granted. Concessions offered are term extensions, capitalizing accrued interest, reducing interest rates to below current market rates or a combination of any of these. Combinations from time to time may include allowing a customer to be placed on interest-only payments. The presentations below in the “other” category are TDR’s with a combination of concessions. At the time of a TDR, additional collateral or a guarantor may be requested.

Loans modified as a TDR are typically already on nonaccrual status and partial chargeoffs may have in some cases already been taken against the outstanding loan balance. The Company classifies TDR loans as impaired loans and evaluates the need for an allowance for loan loss on a loan-by-loan basis. An allowance is based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the estimated fair value of the underlying collateral less any selling costs, if the loan is deemed to be collateral dependent.

For the three and nine months ended September 30, 2012 the following table presents a breakdown of the types of concessions made by loan class:

			Pre-Modification		Post-Modification
For the three months	Number		Outstanding Recorded		Outstanding Recorded
ended September 30, 2012	of Contracts		Investment		Investment
			(dollars in thousands)
Other:
Commercial		1	$	33	$	33
Real estate - commercial		—		—		—
Other real estate construction		1		49		49
Real estate 1 – 4 family construction		—		—		—
Real estate – residential		4		217		217
Home equity		—		—		—
Consumer loans		2		62		62
Other loans		—		—		—
Total		8	$	361	$	361
			Pre-Modification		Post-Modification
For the nine months	Number		Outstanding Recorded		Outstanding Recorded
ended September 30, 2012	of Contracts		Investment		Investment
			(dollars in thousands)
Other:
Commercial		3	$	111	$	101
Real estate - commercial		2		619		113
Other real estate construction		1		49		49
Real estate 1 – 4 family construction		—		—		—
Real estate – residential		5		242		240
Home equity		—		—		—
Consumer loans		3		114		108
Other loans		—		—		—
Total		14	$	1,135	$	611

The following table presents loans that were modified as troubled debt restructurings within the previous twelve months ending September 30, 2012 for which there was a payment default:

	Twelve months ended
	September 30, 2012
	Number		Recorded
	of Loans		Investment
	(dollars in thousands)
Other:
Commercial		1	$	33
Real estate – commercial		—		—
Other real estate construction		1		49
Real estate 1 – 4 family construction		—		—
Real estate – residential		5		240
Home Equity loans		—		—
Consumer loans		2		64
Other loans		—		—
		9	$	386
Total		9	$	386

A default on a troubled debt restructure is defined as being past due 90 days or being out of compliance with the modification agreement. As mentioned, the Company considers TDRs to be impaired loans and has $491,777 in allowance for loan loss as of September 30, 2012, a direct result of these TDR’s.

The following table presents the successes and failures of the types of modifications within the previous twelve months ending September 30, 2012:

	Paid In Full				Paying as restructured				Converted to nonaccrual				Foreclosure/ Default
	Number of		Recorded		Number of		Recorded		Number of		Recorded		Number of		Recorded
September 30, 2012	Loans		Investments		Loans		Investments		Loans		Investments		Loans		Investments
	(dollars in thousands)
Below market interest rate		—	$	—		—	$	—		—	$	—		—	$	—
Other Loans		—		—		15		738		—		—		2		511
Total		—	$	—		15	$	738		—	$	—		2	$	511

The Company has not committed to fund any additional disbursements for TDR’s.

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Loans Held for Investment

9 Months Ended

Sep. 30, 2012

Loans Held for Investment [Abstract]

Loans Held for Investment

Note 5 – Loans Held for Investment

The composition of net loans held for investment by class as of September 30, 2012 and December 31, 2011 are as follows:

	September 30,			December 31,
	2012			2011
	(dollars in thousands)
Commercial
Commercial	$	41,628		$	45,907
Real estate - commercial		106,628			114,944
Other real estate construction loans		26,379			31,601
Noncommercial
Real estate 1-4 family construction		2,827			5,543
Real estate - residential		97,286			101,847
Home equity		50,432			51,413
Consumer loans		13,309			14,710
Other loans		768			602
		339,257			366,567
Less:
Allowance for loan losses		(6,883	)		(6,815	)
Deferred loan (fees) costs, net		86			108
Loans held for investment, net	$	332,460		$	359,860

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Allowance for Loan Losses

9 Months Ended

Sep. 30, 2012

Allowance for Loan Losses [Abstract]

Allowance for Loan Losses

Note 6 - Allowance for Loan Losses

The following table shows the change in the allowance for loss losses by loan segment for the three and nine month periods ended September 30, 2012 and 2011, respectively:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Commercial	2012			2011			2012			2011
	(dollars in thousands)
Balance, beginning of period	$	2,650		$	3,662		$	2,904		$	5,363
Provision (recovery) charged to operations		424			370			476			1,184
Charge-offs		(367	)		(1	)		(721	)		(2,520	)
Recoveries		5			4			53			8
Net (charge-offs)		(362	)		3			(668	)		(2,512	)
Balance at end of period	$	2,712		$	4,035		$	2,712		$	4,035
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Non-Commercial	2012			2011			2012			2011
	(dollars in thousands)
Balance, beginning of period	$	4,419		$	3,612		$	3,911		$	3,704
Provision (recovery) charged to operations		(33	)		113			618			828
Charge-offs		(229	)		(118	)		(400	)		(994	)
Recoveries		14			24			42			93
Net (charge-offs)		(215	)		(94	)		(358	)		(901	)
Balance at end of period	$	4,171		$	3,631		$	4,171		$	3,631

The following table shows period-end loans and reserve balances by loan segment both individually and collectively evaluated for impairment at September 30, 2012 and December 31, 2011:

	Individually Evaluated				Collectively Evaluated				Total
September 30, 2012	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,240	$	17,308	$	1,472	$	157,777	$	2,712	$	175,085
Non-Commercial		1,428		15,149		2,743		149,023		4,171		164,172
Total	$	2,668	$	32,457	$	4,215	$	306,800	$	6,883	$	339,257
	Individually Evaluated				Collectively Evaluated				Total
December 31, 2011	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,137	$	18,882	$	1,767	$	173,570	$	2,904	$	192,452
Non-Commercial		1,446		14,207		2,465		159,908		3,911		174,115
Total	$	2,583	$	33,089	$	4,232	$	333,478	$	6,815	$	366,567

Past due loan information is used by management when assessing the adequacy of the allowance for loan losses. The following table summarizes the past due information of the loan portfolio by class:

			Loans								Accruing
	Loans		90 Days								Loans 90 or
	30-89 Days		or More		Total Past		Current		Total		More Days
September 30, 2012	Past Due		Past due		Due Loans		Loans		Loans		Past Due
	(dollars in thousands)
Commercial	$	428	$	37	$	465	$	41,163	$	41,628	$	—
Real estate - commercial		629		2,235		2,864		103,764		106,628		—
Other real estate construction		250		3,193		3,443		22,936		26,379		—
Real estate 1 -4 family construction		—		—		—		2,827		2,827		—
Real estate - residential		1,549		2,845		4,394		92,892		97,286		—
Home equity		690		306		996		49,436		50,432		—
Consumer loans		203		1		204		13,105		13,309		—
Other loans		—		—		—		768		768		—
Total	$	3,749	$	8,617	$	12,366	$	326,891	$	339,257	$	—
			Loans								Accruing
	Loans		90 Days								Loans 90 or
	30-89 Days		or More		Total Past		Current		Total		More Days
December 31, 2011	Past Due		Past due		Due Loans		Loans		Loans		Past Due
	(dollars in thousands)
Commercial	$	212	$	329	$	541	$	45,366	$	45,907	$	—
Real estate - commercial		2,396		2,742		5,138		109,806		114,944		—
Other real estate construction		358		2,084		2,442		29,159		31,601		—
Real estate construction		—		—		—		5,543		5,543		—
Real estate - residential		2,341		2,441		4,782		97,065		101,847		—
Home equity		298		255		553		50,860		51,413		—
Consumer loan		208		11		219		14,491		14,710		—
Other loans		—		—		—		602		602		—
Total	$	5,813	$	7,862	$	13,675	$	352,892	$	366,567	$	—

Once a loan becomes 90 days past due, the loan is automatically transferred to a nonaccrual status. The exception to this policy is credit card loans that remain in accruing 90 days or more until they are paid current or charged off. Also, mortgage loans that were originated for sale but were not sold and are being held in the loan portfolio remain in an accruing status until they are foreclosed.

The composition of nonaccrual loans by class as of September 30, 2012 and December 31, 2011 is as follows:

	September 30,		December 31,
	2012		2011
	(dollars in thousands)
Commercial	$	37	$	329
Real estate - commercial		2,235		2,742
Other real estate construction		3,193		2,084
Real estate 1 – 4 family construction		—		—
Real estate – residential		2,845		2,441
Home equity		306		255
Consumer loans		1		11
Other loans		—		—
	$	8,617	$	7,862

Management uses a risk-grading program to facilitate the evaluation of probable inherent loan losses and to measure the adequacy of the allowance for loan losses. In this program, risk grades are initially assigned by the loan officers and reviewed and monitored by the lenders and credit administration. The program has eight risk grades summarized in five categories as follows:

Pass: Loans that are pass grade credits include loans that are fundamentally sound and risk factors are reasonable and acceptable. They generally conform to policy with only minor exceptions and any major exceptions are clearly mitigated by other economic factors.

Watch: Loans that are watch credits include loans on management’s watch list where a risk concern may be anticipated in the near future.

Substandard: Loans that are considered substandard are loans that are inadequately protected by current sound net worth, paying capacity of the obligor or the value of the collateral pledged. All nonaccrual loans are graded as substandard.

Doubtful: Loans that are considered to be doubtful have all weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make the collection or liquidation in full on the basis of current existing facts, conditions and values highly questionable and improbable.

Loss: Loans that are considered to be a loss are considered to be uncollectible and of such little value that their continuance as bankable assets is not warranted.

The tables below summarize risk grades of the loan portfolio by class at September 30, 2012 and December 31 2011:

					Sub-
September 30, 2012	Pass		Watch		standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	39,828	$	1,113	$	687	$	—	$	41,628
Real estate - commercial		88,921		8,469		9,238		—		106,628
Other real estate construction		21,279		480		4,620		—		26,379
Real estate 1 - 4 family construction		2,827		—		—		—		2,827
Real estate - residential		81,621		7,613		8,052		—		97,286
Home equity		48,481		702		1,249		—		50,432
Consumer loans		12,617		493		199		—		13,309
Other loans		768		—		—		—		768
Total	$	296,342	$	18,870	$	24,045	$	—	$	339,257
					Sub-
December 31, 2011	Pass		Watch		standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	42,892	$	1,670	$	1,345	$	—	$	45,907
Real estate - commercial		95,699		7,971		11,274		—		114,944
Other real estate construction		26,256		745		4,600		—		31,601
Real estate 1 - 4 family construction		5,538		5		—		—		5,543
Real estate - residential		89,209		4,269		8,369		—		101,847
Home equity		49,743		861		809		—		51,413
Consumer loans		13,970		332		408		—		14,710
Other loans		602		—		—		—		602
Total	$	323,909	$	15,853	$	26,805	$	—	$	366,567

Loans that are in nonaccrual status or 90 days past due and still accruing are considered to be nonperforming. The following tables show the breakdown between performing and nonperforming loans by class at September 30, 2012 and December 31, 2011:

			Non-
September 30, 2012	Performing		Performing		Total
	(dollars in thousands)
Commercial	$	41,591	$	37	$	41,628
Real estate - commercial		104,393		2,235		106,628
Other real estate construction		23,186		3,193		26,379
Real estate 1 – 4 family construction		2,827		—		2,827
Real estate – residential		94,441		2,845		97,286
Home equity		50,126		306		50,432
Consumer loans		13,308		1		13,309
Other loans		768		—		768
Total	$	330,640	$	8,617	$	339,257
			Non-
December 31, 2011	Performing		Performing		Total
	(dollars in thousands)
Commercial	$	45,578	$	329	$	45,907
Real estate - commercial		112,202		2,742		114,944
Other real estate construction		29,517		2,084		31,601
Real estate 1 – 4 family construction		5,543		—		5,543
Real estate – residential		99,406		2,441		101,847
Home equity		51,158		255		51,413
Consumer loans		14,699		11		14,710
Other loans		602		—		602
Total	$	358,705	$	7,862	$	366,567

Loans are considered impaired when, based on current information and events it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement. If a loan is deemed impaired, a specific calculation is performed and a specific reserve is allocated, if necessary. The tables below summarize the loans deemed impaired and the amount of specific reserves allocated by class at September 30, 2012 and December 31, 2011:

			Recorded		Recorded
	Unpaid		Investment		Investment
	Principal		With No		With		Related
September 30, 2012	Balance		Allowance		Allowance		Allowance
	(dollars in thousands)
Commercial	$	1,221	$	765	$	337	$	247
Real estate - commercial		14,105		8,073		3,969		829
Other real estate construction		4,166		2,712		1,452		164
Real estate 1 -4 family construction		720		617		103		103
Real estate - residential		12,696		7,235		5,461		1,007
Home equity		1,405		885		520		180
Consumer loans		328		57		271		138
Other loans		—		—		—		—
Total	$	34,641	$	20,344	$	12,113	$	2,668

			Recorded		Recorded
	Unpaid		Investment		Investment
	Principal		With No		With		Related
December 31, 2011	Balance		Allowance		Allowance		Allowance
	(dollars in thousands)
Commercial	$	2,099	$	889	$	1,091	$	578
Real estate - commercial		14,951		11,365		1,523		452
Other real estate construction		4,016		2,644		1,370		107
Real estate 1 -4 family construction		1,095		501		594		202
Real estate - residential		11,877		7,231		4,646		1,001
Home equity		993		753		240		124
Consumer loans		242		49		193		119
Other loans		—		—		—		—
Total	$	35,273	$	23,432	$	9,657	$	2,583

	Three Months ended				Three Months ended
	September 30, 2012				September 30, 2011
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Income		Investment		Income
	(dollars in thousands)
Commercial	$	1,112	$	23	$	1,912	$	32
Real estate - commercial		12,245		153		12,496		167
Other real estate construction		4,168		55		6,749		48
Real estate 1 -4 family construction		1,014		15		1,490		31
Real estate - residential		12,680		166		10,522		43
Home equity		1,333		18		1,435		24
Consumer loans		343		4		321		4
Other loans		—		—		—		—
Total	$	32,895	$	434	$	34,925	$	349

	Nine Months ended				Nine Months ended
	September 30, 2012				September 30, 2011
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Income		Investment		Income
	(dollars in thousands)
Commercial	$	1,301	$	50	$	1,529	$	75
Real estate - commercial		12,397		493		16,162		430
Other real estate construction		4,112		180		8,456		79
Real estate 1 -4 family construction		1,124		31		1,347		57
Real estate - residential		12,261		477		9,947		368
Home equity		1,244		42		1,348		46
Consumer loans		332		14		297		14
Other loans		—		—		—		—
Total	$	32,771	$	1,287	$	39,086	$	1,069

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 8 - Commitments and Contingencies

The subsidiary banks are party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of their customers. These financial instruments include commitments to extend credit, lines of credit and standby letters of credit. These instruments involve elements of credit risk in excess of amounts recognized in the accompanying financial statements.

The banks’ risk of loss with the unfunded loans and lines of credit or standby letters of credit is represented by the contractual amount of these instruments. The banks use the same credit policies in making commitments under such instruments as they do for on-balance sheet instruments. The amount of collateral obtained, if any, is based on management’s credit evaluation of the borrower. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Credit card commitments are unsecured. At September 30, 2012, outstanding financial instruments whose contract amounts represent credit risk were approximately:

(in thousands)
Commitments to extend credit	$	64,319
Credit card commitments		7,922
Standby letters of credit		1,345
Total commitments	$	73,586

XML

Investment Securities (Details 3) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Amortized cost and fair value of the available for sale securities portfolio
Due within twelve months Amortized Cost	$ 351
Due within twelve months Estimated Fair Value	354
Due within Twelve Months Book Yield	3.63%
Due after one but within five years, Amortized Cost	44,500
Due after one but within five years, Estimated Fair Value	46,337
Due after one but within five years, Book Yield	1.92%
Due after five but within ten years, Amortized Cost	37,588
Due after five but within ten years, Estimated Fair Value	39,195
Due after five but within ten years, Book Yield	2.18%
Due after ten years, Amortized Cost	44,126
Due after ten years, Fair Value	44,388
Due after ten years, Book Yield	2.93%
Total securities available for sale, Amortized Cost	126,565
Total securities available for sale Estimated Fair Value	130,274	88,661
Total securities available for sale Book Yield	2.35%
U.S. Treasury [Member]
Amortized cost and fair value of the available for sale securities portfolio
Due after one but within five years, Amortized Cost	16,290
Due after one but within five years, Estimated Fair Value	17,210
Due after one but within five years, Book Yield	1.90%
Due after five but within ten years, Amortized Cost	16,973
Due after five but within ten years, Estimated Fair Value	17,830
Due after five but within ten years, Book Yield	1.76%
Total securities available for sale, Amortized Cost	33,263
Total securities available for sale Estimated Fair Value	35,040	33,532
Total securities available for sale Book Yield	1.83%
U.S. Government agencies [Member]
Amortized cost and fair value of the available for sale securities portfolio
Due after one but within five years, Amortized Cost	26,648
Due after one but within five years, Estimated Fair Value	27,479
Due after one but within five years, Book Yield	1.84%
Due after five but within ten years, Amortized Cost	8,836
Due after five but within ten years, Estimated Fair Value	8,928
Due after five but within ten years, Book Yield	1.43%
Total securities available for sale, Amortized Cost	35,484
Total securities available for sale Estimated Fair Value	36,407	19,997
Total securities available for sale Book Yield	1.73%
Mortgage-backed securities [Member]
Amortized cost and fair value of the available for sale securities portfolio
Due after five but within ten years, Amortized Cost	7,008
Due after five but within ten years, Estimated Fair Value	7,141
Due after five but within ten years, Book Yield	3.50%
Due after ten years, Amortized Cost	42,628
Due after ten years, Fair Value	42,749
Due after ten years, Book Yield	2.89%
Total securities available for sale, Amortized Cost	49,636
Total securities available for sale Estimated Fair Value	49,890	24,263
Total securities available for sale Book Yield	2.98%
State and political subdivisions [Member]
Amortized cost and fair value of the available for sale securities portfolio
Due within twelve months Amortized Cost	351
Due within twelve months Estimated Fair Value	354
Due within Twelve Months Book Yield	3.63%
Due after one but within five years, Amortized Cost	1,562
Due after one but within five years, Estimated Fair Value	1,648
Due after one but within five years, Book Yield	3.51%
Due after five but within ten years, Amortized Cost	4,771
Due after five but within ten years, Estimated Fair Value	5,296
Due after five but within ten years, Book Yield	3.10%
Due after ten years, Amortized Cost	1,498
Due after ten years, Fair Value	1,639
Due after ten years, Book Yield	4.12%
Total securities available for sale, Amortized Cost	8,182
Total securities available for sale Estimated Fair Value	$ 8,937	$ 10,869
Total securities available for sale Book Yield	3.39%

XML

Fair Value Disclosures (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Level 1 [Member]
Assets measured at fair value on a nonrecurring basis
Total assets at fair value	$ 35,040
Level 2 [Member]
Assets measured at fair value on a nonrecurring basis
Total assets at fair value	95,234
Level 3 [Member]
Assets measured at fair value on a nonrecurring basis
Total assets at fair value
Fair Value Nonrecurring [Member]
Assets measured at fair value on a nonrecurring basis
Impaired loans	9,445	7,074
Loans held for sale	1,025	1,958
Other real estate owned	6,011	1,464
Total assets at fair value	16,481	10,496
Total liabilities at fair value
Fair Value Nonrecurring [Member] | Level 1 [Member]
Assets measured at fair value on a nonrecurring basis
Impaired loans
Loans held for sale
Other real estate owned
Total assets at fair value
Total liabilities at fair value
Fair Value Nonrecurring [Member] | Level 2 [Member]
Assets measured at fair value on a nonrecurring basis
Impaired loans
Loans held for sale	1,025	1,958
Other real estate owned
Total assets at fair value	1,025	1,958
Total liabilities at fair value
Fair Value Nonrecurring [Member] | Level 3 [Member]
Assets measured at fair value on a nonrecurring basis
Impaired loans	9,445	7,074
Loans held for sale
Other real estate owned	6,011	1,464
Total assets at fair value	15,456	8,538
Total liabilities at fair value

XML

Per Share Data (Tables)

9 Months Ended

Sep. 30, 2012

Per Share Data [Abstract]

Computation of basic and dilutive earnings per share

Basic and diluted net income per common share have been computed based upon net income available to common shareholders as presented in the accompanying consolidated statements of operations divided by the weighted average number of common shares outstanding or assumed to be outstanding. The computation of basic and dilutive earnings per share is summarized below:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Weighted average number of common shares outstanding		7,524,075			7,593,929			7,524,075			7,593,929
Effect of ESOP shares		(169,607	)		(128,959	)		(126,945	)		(121,518	)
Adjusted weighted average number of common shares used in computing basic net income per common share		7,354,468			7,464,970			7,397,130			7,472,411
Effect of dilutive stock options		—			—			—			—
Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per common share		7,354,468			7,464,970			7,397,130			7,472,411

XML

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Outstanding financial instruments whose contract amounts represent credit risk

At September 30, 2012, outstanding financial instruments whose contract amounts represent credit risk were approximately:

(in thousands)
Commitments to extend credit	$	64,319
Credit card commitments		7,922
Standby letters of credit		1,345
Total commitments	$	73,586

XML

Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Outstanding financial instruments whose contract amounts represent credit risk
Total commitments	$ 73,586
Commitments to extend credit [Member]
Outstanding financial instruments whose contract amounts represent credit risk
Total commitments	64,319
Credit card commitments [Member]
Outstanding financial instruments whose contract amounts represent credit risk
Total commitments	7,922
Standby letters of credit [Member]
Outstanding financial instruments whose contract amounts represent credit risk
Total commitments	$ 1,345

XML

Allowance for Loan Losses (Details 4) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Summary of risk grades of portfolio by class
Financing Receivable	$ 332,460	$ 359,860	[1]
Commercial [Member]
Summary of risk grades of portfolio by class
Financing Receivable	41,628	45,907
Real estate-commercial [Member]
Summary of risk grades of portfolio by class
Financing Receivable	106,628	114,944
Other real estate construction [Member]
Summary of risk grades of portfolio by class
Financing Receivable	26,379	31,601
Real estate 1-4 family construction [Member]
Summary of risk grades of portfolio by class
Financing Receivable	2,827	5,543
Real estate-residential [Member]
Summary of risk grades of portfolio by class
Financing Receivable	97,286	101,847
Home equity [Member]
Summary of risk grades of portfolio by class
Financing Receivable	50,432	51,413
Consumer loans [Member]
Summary of risk grades of portfolio by class
Financing Receivable	13,309	14,710
Other loans [Member]
Summary of risk grades of portfolio by class
Financing Receivable	768	602
Pass [Member]
Summary of risk grades of portfolio by class
Financing Receivable	296,342	323,909
Pass [Member] | Commercial [Member]
Summary of risk grades of portfolio by class
Financing Receivable	39,828	42,892
Pass [Member] | Real estate-commercial [Member]
Summary of risk grades of portfolio by class
Financing Receivable	88,921	95,699
Pass [Member] | Other real estate construction [Member]
Summary of risk grades of portfolio by class
Financing Receivable	21,279	26,256
Pass [Member] | Real estate 1-4 family construction [Member]
Summary of risk grades of portfolio by class
Financing Receivable	2,827	5,538
Pass [Member] | Real estate-residential [Member]
Summary of risk grades of portfolio by class
Financing Receivable	81,621	89,209
Pass [Member] | Home equity [Member]
Summary of risk grades of portfolio by class
Financing Receivable	48,481	49,743
Pass [Member] | Consumer loans [Member]
Summary of risk grades of portfolio by class
Financing Receivable	12,617	13,970
Pass [Member] | Other loans [Member]
Summary of risk grades of portfolio by class
Financing Receivable	768	602
Watch [Member]
Summary of risk grades of portfolio by class
Financing Receivable	18,870	15,853
Watch [Member] | Commercial [Member]
Summary of risk grades of portfolio by class
Financing Receivable	1,113	1,670
Watch [Member] | Real estate-commercial [Member]
Summary of risk grades of portfolio by class
Financing Receivable	8,469	7,971
Watch [Member] | Other real estate construction [Member]
Summary of risk grades of portfolio by class
Financing Receivable	480	745
Watch [Member] | Real estate 1-4 family construction [Member]
Summary of risk grades of portfolio by class
Financing Receivable		5
Watch [Member] | Real estate-residential [Member]
Summary of risk grades of portfolio by class
Financing Receivable	7,613	4,269
Watch [Member] | Home equity [Member]
Summary of risk grades of portfolio by class
Financing Receivable	702	861
Watch [Member] | Consumer loans [Member]
Summary of risk grades of portfolio by class
Financing Receivable	493	332
Watch [Member] | Other loans [Member]
Summary of risk grades of portfolio by class
Financing Receivable
Sub-standard [Member]
Summary of risk grades of portfolio by class
Financing Receivable	24,045	26,805
Sub-standard [Member] | Commercial [Member]
Summary of risk grades of portfolio by class
Financing Receivable	687	1,345
Sub-standard [Member] | Real estate-commercial [Member]
Summary of risk grades of portfolio by class
Financing Receivable	9,238	11,274
Sub-standard [Member] | Other real estate construction [Member]
Summary of risk grades of portfolio by class
Financing Receivable	4,620	4,600
Sub-standard [Member] | Real estate 1-4 family construction [Member]
Summary of risk grades of portfolio by class
Financing Receivable
Sub-standard [Member] | Real estate-residential [Member]
Summary of risk grades of portfolio by class
Financing Receivable	8,052	8,369
Sub-standard [Member] | Home equity [Member]
Summary of risk grades of portfolio by class
Financing Receivable	1,249	809
Sub-standard [Member] | Consumer loans [Member]
Summary of risk grades of portfolio by class
Financing Receivable	199	408
Sub-standard [Member] | Other loans [Member]
Summary of risk grades of portfolio by class
Financing Receivable
Doubtful [Member]
Summary of risk grades of portfolio by class
Financing Receivable
Doubtful [Member] | Commercial [Member]
Summary of risk grades of portfolio by class
Financing Receivable
Doubtful [Member] | Real estate-commercial [Member]
Summary of risk grades of portfolio by class
Financing Receivable
Doubtful [Member] | Other real estate construction [Member]
Summary of risk grades of portfolio by class
Financing Receivable
Doubtful [Member] | Real estate 1-4 family construction [Member]
Summary of risk grades of portfolio by class
Financing Receivable
Doubtful [Member] | Real estate-residential [Member]
Summary of risk grades of portfolio by class
Financing Receivable
Doubtful [Member] | Home equity [Member]
Summary of risk grades of portfolio by class
Financing Receivable
Doubtful [Member] | Consumer loans [Member]
Summary of risk grades of portfolio by class
Financing Receivable
Doubtful [Member] | Other loans [Member]
Summary of risk grades of portfolio by class
Financing Receivable

[1] Derived from audited consolidated financial statements

XML

Consolidated Statements of Income (Parenthetical) (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Consolidated Statements of Income [Abstract]
Time deposits	$ 100,000	$ 100,000	$ 100,000	$ 100,000

XML

Comprehensive Income

9 Months Ended

Sep. 30, 2012

Comprehensive Income [Abstract]

Comprehensive Income

Note 2 – Comprehensive Income

The Company reports as comprehensive income all changes in shareholders’ equity during the year from sources other than shareholders. Other comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. The Company’s only component of other comprehensive income is unrealized gains and losses, net of income tax, on investment securities available for sale.

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Fair Value Disclosures (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair value information for assets and liabilities measured at fair value on a recurring basis

The following table provides fair value information for assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011:

	September 30, 2012
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	35,040	$	35,040	$	—	$	—
US Government Agencies		36,407		—		36,407		—
GSE - Mortgage-backed securities and CMO’s		49,890		—		49,890		—
State and political subdivisions		8,937		—		8,937		—
Total assets at fair value	$	130,274	$	35,040	$	95,234	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

	December 31, 2011
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	33,532	$	33,532	$	—	$	—
US Gov’t		19,997		—		19,997		—
Mortgage-backed securities and CMO’s		24,263		—		24,263		—
State and political subdivisions		10,869		—		10,869		—
Total assets at fair value	$	88,661	$	33,532	$	55,129	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

Assets measured at fair value on a nonrecurring basis

Assets measured at fair value on a nonrecurring basis are included in the table below as of September 30, 2012 and December 31, 2011:

	September 30, 2012
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	9,445	$	—	$	—	$	9,445
Loans held for sale		1,025		—		1,025		—
Other real estate owned		6,011		—		—		6,011
Total assets at fair value	$	16,481	$	—	$	1,025	$	15,456
Total liabilities at fair value	$	—	$	—	$	—	$	—
	December 31, 2011
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	7,074	$	—	$	—	$	7,074
Loans held for sale		1,958		—		1,958		—
Other real estate owned		1,464		—		—		1,464
Total assets at fair value	$	10,496	$	—	$	1,958	$	8,538
Total liabilities at fair value	$	—	$	—	$	—	$	—

XML

Allowance for Loan Losses (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011		Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2010
Schedule of loans and reserve balances by loan class both individually and collectively evaluated for impairment
Reserve	$ 6,883		$ 6,815	[1]
Loans	339,257		366,567
Individually Evaluated [Member]
Schedule of loans and reserve balances by loan class both individually and collectively evaluated for impairment
Reserve	2,668		2,583
Loans	32,457		33,089
Collectively Evaluated [Member]
Schedule of loans and reserve balances by loan class both individually and collectively evaluated for impairment
Reserve	4,215		4,232
Loans	306,800		333,478
Commercial [Member]
Schedule of loans and reserve balances by loan class both individually and collectively evaluated for impairment
Reserve	2,712	2,650	2,904		4,035	3,662	5,363
Loans	175,085		192,452
Commercial [Member] | Individually Evaluated [Member]
Schedule of loans and reserve balances by loan class both individually and collectively evaluated for impairment
Reserve	1,240		1,137
Loans	17,308		18,882
Commercial [Member] | Collectively Evaluated [Member]
Schedule of loans and reserve balances by loan class both individually and collectively evaluated for impairment
Reserve	1,472		1,767
Loans	157,777		173,570
Non Commercial [Member]
Schedule of loans and reserve balances by loan class both individually and collectively evaluated for impairment
Reserve	4,171	4,419	3,911		3,631	3,612	3,704
Loans	164,172		174,115
Non Commercial [Member] | Individually Evaluated [Member]
Schedule of loans and reserve balances by loan class both individually and collectively evaluated for impairment
Reserve	1,428		1,446
Loans	15,149		14,207
Non Commercial [Member] | Collectively Evaluated [Member]
Schedule of loans and reserve balances by loan class both individually and collectively evaluated for impairment
Reserve	2,743		2,465
Loans	$ 149,023		$ 159,908

[1] Derived from audited consolidated financial statements

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Fair Value Disclosures (Policies)

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Policy

Accounting Standards Codification (ASC) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.

ASC 820 defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which those assets or liabilities are sold and considers assumptions that market participants would use when pricing those assets or liabilities. Fair values determined using Level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based on Level 2 inputs, which exist when observable data exists for similar assets and liabilities. Fair values for assets and liabilities for which identical or similar assets and liabilities are not actively traded in observable markets are based on Level 3 inputs, which are considered to be unobservable.

Fair Value of Financial Instruments

ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring basis or non-recurring basis.

Fair Value Measurements

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurement”. The purpose of the standard is to clarify and combine fair value measurements and disclosure requirements for U.S. generally accepted accounting principles, or GAAP, and international financial reporting standards, or IFRS. The new standard provides amendments and wording changes used to describe certain requirements for measuring fair value and for disclosing information about fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2011, and should be applied prospectively to the beginning of the annual period of adoption. The adoption of this statement did not have a material impact on the consolidated financial statements.

Comprehensive Income

In June 2011, the FASB issued ASU 2011-05, an update to ASC 220, “Comprehensive Income.” This update requires that all nonowner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, ASU 2011-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. ASU 2011-05 is effective for annual periods beginning after December 15, 2011, and did not have a significant impact on the Company’s financial statements.

Intangibles Goodwill and Other

In September 2011, the FASB issued ASU 2011-08, an update to ASC 350 “Intangibles - Goodwill and Other.” This update gives entities the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. ASU 2011-08 is effective for annual and interim impairment tests beginning after December 15, 2011, and did not have a significant impact on the Company’s financial statements.

In July 2012, the FASB issued ASU 2012-02, an update to ASC 350 “Intangibles Goodwill and Other”. The amendments in the Update are intended to reduce cost and complexity by providing an entity the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative impairment test. The Update also enhances consistency of impairment testing guidance among long-lived asset categories by permitting entities to assess qualitative factors to determine whether it is necessary to calculate the asset’s fair value when testing for impairment, which is equivalent to the impairment testing requirements for other long-lived assets. In conducting a qualitative assessment, an entity should consider the extent to which relevant circumstances and events, both individually and in the aggregate, could have affected the significant inputs used to determine the fair value of the indefinite-lived intangible asset since the last assessment. Consideration should also be given as to whether there have been changes to the carrying amount of the indefinite-lived intangible asset when evaluating whether it is more likely than not that the indefinite-lived asset is impaired. Positive and mitigating events and circumstances that could affect its determination of whether it is more likely than not that the indefinite-lived asset is impaired should also be considered. The Update is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of this update is not expected to have a significant impact on the Company’s financial statements.