RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2012

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Note 14.  RELATED PARTY TRANSACTIONS

The Company and the Bank have engaged in and intend to continue to engage in banking and financial transactions in the conduct of its business with directors and executive officers of the Company and the Bank and their related parties.

The Bank has granted loans, letters of credit and lines of credit to directors, executive officers and their related parties.  The following table summarizes the changes in the total amounts of such outstanding loans, advances under lines of credit as well as repayments during the years ended December 31, 2012 and 2011:

(in thousands)	2012			2011
Balance January 1,	$	87,442		$	92,217
New loans and advances	64,509			68,288
Repayments	(118,655		)	(72,365		)
Other (1)	—			(698		)
Balance December 31,	$	33,296		$	87,442

(1) Other represents loans to related parties that ceased being related parties during the year

At December 31, 2012, loans in the amount of $196 thousand made to directors, executive officers and their related parties were not performing in accordance with the terms of the loan agreements.

Included in related party loans is a commercial line of credit with a company owned by a director with a total aggregate balance outstanding of $8.0 million.  The Company also sold a participation interest in this line to the same director in the amount of $5.2 million, of which $3.2 million is outstanding. The Bank receives a 25 basis point annual servicing fee from this director on the participation balance.  At December 31, 2011, the aggregate amount outstanding under the line was $7.4 million and the participation interest sold under this line was $3.0 million

Deposits from directors, executive officers and their related parties held by the Bank at December 31, 2012 and 2011 amounted to $66.7 million and $146.8 million, respectively.  Interest paid on the deposits amounted to $139 thousand, $446 thousand, and $862 thousand for the years ended December 31, 2012, 2011, and 2010, respectively.

In the course of its operations, the Company acquires goods and services from and transacts business with various companies of related parties.  The Company recorded payments for these services of $1.6 million, $1.8 million, and $1.1 million in 2012, 2011, and 2010, respectively.

Subordinated notes held by officers and directors and/or their related parties totaled $10 million at December 31, 2012 and 2011. There was no interest payments made to directors and/or their related parties in 2012 and 2011. Interest paid to directors on the notes totaled $685 thousand in 2010.  Interest accrued and unpaid on the notes totaled $2.1 million and $1.2 million at December 31, 2012 and 2011, respectively.

The Company leases its Honesdale Route 6 branch location from a related party.  Total lease payments were $9 thousand for each of the years ended December 31, 2012, 2011, and 2010.

During the year ended December 31, 2012, the Company sold an OREO property to a related party for $202 thousand, with a gain of $41 thousand recognized on the sale.