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8. ALLOWANCE FOR LOAN AND LEASE LOSSES

6 Months Ended

Jun. 30, 2013

Allowance For Loans and Lease Losses [Abstract]

8. ALLOWANCE FOR LOAN AND LEASE LOSSES

The Company’s loan and lease portfolio allocated by management’s internal risk ratings as of June 30, 2013 and December 31, 2012 are summarized below:


June 30, 2013	Credit Risk Profile by Internally Assigned Grade
(dollars in thousands)			Real Estate
	Commercial		Commercial		Multi-family		Construction		Residential
Grade:
Pass	$	23,411	$	137,096	$	8,105	$	2,476	$	12,764
Watch		1,340		14,052		1,169		3,406		3,519
Special mention		553		16,309		431		596		1,292
Substandard		1,508		13,128		510		—		787
Doubtful		242		—		—		—		—
Total	$	27,054	$	180,585	$	10,215	$	6,478	$	18,362

	Credit Risk Profile by Internally Assigned Grade Other Credit Exposure
	Leases		Agriculture		Consumer		Total
Grade:
Pass	$	1,172	$	2,810	$	6,343	$	194,177
Watch		—		—		25		23,511
Special mention		—		397		130		19,708
Substandard		—		—		133		16,066
Doubtful		—		—		—		242
Total	$	1,172	$	3,207	$	6,631	$	253,704


December 31, 2012	Credit Risk Profile by Internally Assigned Grade
(dollars in thousands)			Real Estate
	Commercial		Commercial		Multi-family		Construction		Residential
Grade:
Pass	$	25,670	$	134,969	$	7,018	$	3,049	$	13,283
Watch		1,994		14,613		1,181		3,262		2,518
Special mention		653		16,041		441		607		1,163
Substandard		1,804		14,503		515		—		737
Doubtful		690		—		—		—		—
Total	$	30,811	$	180,126	$	9,155	$	6,918	$	17,701

	Credit Risk Profile by Internally Assigned Grade Other Credit Exposure
	Leases		Agriculture		Consumer		Total
Grade:
Pass	$	1,506	$	2,938	$	7,696	$	196,129
Watch		—		—		251		23,819
Special mention		—		402		153		19,460
Substandard		3		—		469		18,031
Doubtful		—		—		—		690
Total	$	1,509	$	3,340	$	8,569	$	258,129

The allocation of the Company’s allowance for loan and lease losses and by portfolio segment and by impairment methodology are summarized below:

June 30, 2013
(dollars in thousands)				Real Estate												Other
	Com- mercial			Com- mercial			Multi- Family			Construc- tion			Residential			Leases		Agri- culture		Consumer			Unallocated			Total
Allowance for Loan and Lease Losses

Beginning balance, January 1, 2013	$	1,351		$	2,526		$	238		$	594		$	477		$	3	$	87	$	262		$	243		$	5,781
Provision for loan losses		(158	)		402			9			(172	)		115			—		4		(87	)		87			200
Loans charged off		(11	)		(355	)		—			—			(38	)		—		—		(5	)		—			(409	)
Recoveries		97			11			—			—			—			—		—		—			—			108

Ending balance, June 30, 2013	$	1,279		$	2,584		$	247		$	422		$	554		$	3	$	91	$	170		$	330		$	5,680

Ending balance:
Individually evaluated for impairment	$	543		$	593		$	118		$	—		$	217		$	—	$	—	$	24		$	—		$	1,495

Ending balance:
Collectively evaluated for impairment	$	736		$	1,991		$	129		$	422		$	337		$	3	$	91	$	146		$	330		$	4,185

Loans

Ending balance	$	27,054		$	180,585		$	10,215		$	6,478		$	18,362		$	1,172	$	3,207	$	6,631		$	—		$	253,704

Ending balance:
Individually evaluated for impairment	$	2,258		$	13,883		$	1,665		$	256		$	2,370		$	—	$	—	$	171		$	—		$	20,603

Ending balance:
Collectively evaluated for impairment	$	24,796		$	166,702		$	8,550		$	6,222		$	15,992		$	1,172	$	3,207	$	6,460		$	—		$	233,101

Allowance for Loan and Lease Losses

Beginning balance, March 31, 2013	$	1,331		$	2,667		$	256		$	430		$	501		$	3	$	91	$	249		$	375		$	5,903
Provision for loan losses		(74	)		262			(9	)		(8	)		53			—		—		(79	)		(45	)		100
Loans charged off		(1	)		(355	)		—			—			—			—		—		—			—			(356	)
Recoveries		23			10			—			—			—			—		—		—			—			33

Ending balance, June 30, 2013	$	1,279		$	2,584		$	247		$	422		$	554		$	3	$	91	$	170		$	330		$	5,680

December 31, 2012

(dollars in thousands)


			Real Estate								Other
	Com- mercial		Com- mercial		Multi- Family		Construc- tion		Residential		Leases		Agri- culture		Consumer		Unallocated		Total
Ending balance:
Individually evaluated for impairment	$	480	$	786	$	122	$	—	$	179	$	—	$	—	$	28	$	—	$	1,595

Ending balance:
Collectively evaluated for impairment	$	871	$	1,740	$	116	$	594	$	298	$	3	$	87	$	234	$	243	$	4,186

Loans

Ending balance	$	30,811	$	180,126	$	9,155	$	6,918	$	17,701	$	1,509	$	3,340	$	8,569	$	—	$	258,129

Ending balance:
Individually evaluated for impairment	$	2,828	$	19,105	$	1,681	$	263	$	2,429	$	—	$	—	$	247	$	—	$	26,553

Ending balance:
Collectively evaluated for impairment	$	27,983	$	161,021	$	7,474	$	6,655	$	15,272	$	1,509	$	3,340	$	8,322	$	—	$	231,576

June 30, 2012
(dollars in thousands)				Real Estate												Other
	Com- mercial			Com- mercial			Multi- Family			Construc- tion			Residential			Leases			Agri- culture			Consumer			Unallocated			Total
Allowance for Loan and Lease Losses

Beginning balance, January 1, 2012	$	1,536		$	3,156		$	198		$	582		$	609		$	79		$	167		$	348		$	366		$	7,041
Provision for loan losses		(320	)		703			70			(151	)		6			(76	)		241			510			(28	)		955
Loans charged off		(151	)		(845	)		(8	)		(82	)		(113	)		(8	)		(202	)		(492	)					(1,901	)
Recoveries		—			65			3			22			—			6			—			10						106
Ending balance, June 30, 2012	$	1,065		$	3,079		$	263		$	371		$	502		$	1		$	206		$	376		$	338		$	6,201

Allowance for Loan and Lease Losses

Beginning balance, March 31, 2012	$	945		$	2,959		$	296		$	467		$	713		$	7		$	254		$	373		$	251		$	6,265
Provision for loan losses		223			333			(32	)		(40	)		(211	)		(12	)		(48	)		75			87			375
Loans charged off		(103	)		(234	)		—			(78	)		—			—			—			(82	)		—			(497	)
Recoveries		—			21			(1	)		22			—			6-			—			10			—			58
Ending balance, June 30, 2012	$	1,065		$	3,079		$	263		$	371		$	502		$	1		$	206		$	376		$	338		$	6,201

The Company’s aging analysis of the loan and lease portfolio at June 30, 2013 and December 31, 2012 are summarized below:


June 30, 2013													Past Due
(dollars in thousands)					Past Due								Greater Than
	30-59 Days		60-89 Days		Greater Than		Total Past						90 Days and
	Past Due		Past Due		90 Days		Due		Current		Total Loans		Accruing		Nonaccrual
Commercial:
Commercial	$	10	$	29	$	1,702	$	1,741	$	25,313	$	27,054		—	$	1,744
Real estate:
Commercial		2,012		—		195		2,207		178,378		180,585		—		3,283
Multi-family		—		—		—		—		10,215		10,215		—		—
Construction		—		—		—		—		6,478		6,478		—		—
Residential		—		—		173		173		18,189		18,362		—		173
Other:
Leases		—		—		—		—		1,172		1,172		—		—
Agriculture		—		—		—		—		3,207		3,207		—		—
Consumer		2		99		—		101		6,530		6,631		—		164
Total	$	2,024	$	128	$	2,070	$	4,222	$	249,482	$	253,704	$	—	$	5,364

December 31, 2012													Past Due
(dollars in thousands)					Past Due								Greater Than
	30-59 Days		60-89 Days		Greater Than		Total Past						90 Days and
	Past Due		Past Due		90 Days		Due		Current		Total Loans		Accruing		Nonaccrual
Commercial:
Commercial	$	804	$	—	$	1,497	$	2,301	$	28,510	$	30,811		—	$	2,352
Real estate:
Commercial		—		703		700		1,403		178,723		180,126		—		2,687
Multi-family		—		—		—		—		9,155		9,155		—		—
Construction		—		—		—		—		6,918		6,918		—		—
Residential		—		—		210		210		17,491		17,701		—		210
Other:
Leases		—		—		3		3		1,506		1,509		—		3
Agriculture		—		—		—		—		3,340		3,340		—		—
Consumer		—		60		114		174		8,395		8,569		—		222

Total	$	804	$	763	$	2,524	$	4,091	$	254,038	$	258,129	$	—	$	5,474

- Definition

Disclosure of accounting policy for estimating the allowance for losses on loans and lease receivables. The disclosure may include (a) how the entity determines each element of the allowance, (b) which loans are evaluated individually and which loans are evaluated as a group, (c) how the entity determines both the allocated and unallocated portions of the allowance, (d) how the entity determines the loss factors applied to graded loans in order to develop a general allowance, and (e) what self-correcting mechanism the entity uses to reduce differences between estimated and actual losses.

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