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LOANS (Tables)
 3 Months Ended
Mar. 31, 2013
LOANS [Abstract]  
Loan portfolio
The composition of the Company's loan portfolio, by loan class, is as follows:
 
($ in thousands)
 
 
March 31,
2013
 
 
December 31,
2012
 
 
 
 
 
 
 
Commercial
 
$
94,253
 
 
$
88,810
 
Commercial Real Estate
 
 
196,081
 
 
 
188,426
 
Agriculture
 
 
40,012
 
 
 
52,747
 
Residential Mortgage
 
 
51,760
 
 
 
51,266
 
Residential Construction
 
 
7,984
 
 
 
7,586
 
Consumer
 
 
57,553
 
 
 
59,393
 
 
 
447,643
 
 
 
448,228
 
Allowance for loan losses
 
 
(8,846
)
 
 
(8,554
)
Net deferred origination fees and costs
 
 
838
 
 
 
775
 
 
 
 
 
 
 
 
 
Loans, net
 
$
439,635
 
 
$
440,449
 
Non-accrual loans by loan class
The Company's non-accrual loans by loan class, as of March 31, 2013 and December 31, 2012 were as follows:
 
($ in thousands)
 
 
March 31,
2013
 
 
December 31,
2012
 
 
 
 
 
 
 
Commercial
 
$
2,747
 
 
$
2,853
 
Commercial Real Estate
 
 
1,840
 
 
 
1,879
 
Agriculture
 
 
—
 
 
 
—
 
Residential Mortgage
 
 
1,940
 
 
 
2,095
 
Residential Construction
 
 
—
 
 
 
—
 
Consumer
 
 
282
 
 
 
441
 
 
 
 
 
 
 
 
 
 
$
6,809
 
 
$
7,268
 
Aging analysis of past due loans, by loan class
An age analysis of past due loans, segregated by loan class, as of March 31, 2013 and December 31, 2012 is as follows:
 
($ in thousands)
 
30-59 Days Past Due
 
 
60-89 Days Past Due
 
 
90 Days or more Past Due
 
 
Total Past Due
 
 
Current
 
 
Total Loans
 
March 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
159
 
 
$
103
 
 
$
146
 
 
$
408
 
 
$
93,845
 
 
$
94,253
 
Commercial Real Estate
 
 
345
 
 
 
—
 
 
 
549
 
 
 
894
 
 
 
195,187
 
 
 
196,081
 
Agriculture
 
 
156
 
 
 
—
 
 
 
—
 
 
 
156
 
 
 
39,856
 
 
 
40,012
 
Residential Mortgage
 
 
467
 
 
 
—
 
 
 
347
 
 
 
814
 
 
 
50,946
 
 
 
51,760
 
Residential Construction
 
 
52
 
 
 
—
 
 
 
—
 
 
 
52
 
 
 
7,932
 
 
 
7,984
 
Consumer
 
 
7
 
 
 
—
 
 
 
189
 
 
 
196
 
 
 
57,357
 
 
 
57,553
 
Total
 
$
1,186
 
 
$
103
 
 
$
1,231
 
 
$
2,520
 
 
$
445,123
 
 
$
447,643
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
2,255
 
 
$
—
 
 
$
170
 
 
$
2,425
 
 
$
86,385
 
 
$
88,810
 
Commercial Real Estate
 
 
1,272
 
 
 
—
 
 
 
566
 
 
 
1,838
 
 
 
186,588
 
 
 
188,426
 
Agriculture
 
 
—
 
 
 
—
 
 
 
—
 
 
 
—
 
 
 
52,747
 
 
 
52,747
 
Residential Mortgage
 
 
570
 
 
 
103
 
 
 
335
 
 
 
1,008
 
 
 
50,258
 
 
 
51,266
 
Residential Construction
 
 
53
 
 
 
—
 
 
 
—
 
 
 
53
 
 
 
7,533
 
 
 
7,586
 
Consumer
 
 
8
 
 
 
747
 
 
 
126
 
 
 
881
 
 
 
58,512
 
 
 
59,393
 
Total
 
$
4,158
 
 
$
850
 
 
$
1,197
 
 
$
6,205
 
 
$
442,023
 
 
$
448,228
 
Impaired loans by loan class
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments.  Loans to be considered for impairment include non-accrual loans, troubled debt restructurings and loans with a risk rating of 6 (substandard) or worse.  Once identified, impaired loans are measured individually for impairment using one of three methods:  present value of expected cash flows discounted at the loan's effective interest rate; the loan's observable market price; fair value of collateral if the loan is collateral dependent.  In general, any portion of the recorded investment in a collateral dependent loan in excess of the fair value of the collateral that can be identified as uncollectible, and is, therefore, deemed a confirmed loss, should be promptly charged-off against the allowance for loan losses.
 
Impaired loans, segregated by loan class, as of March 31, 2013 and December 31, 2012 were as follows:
 
($ in thousands)
Unpaid
Contractual
Principal
Balance
Recorded
Investment
with no
Allowance
Recorded
Investment
with
Allowance
Total
Recorded
Investment
 
Related
Allowance
March 31, 2013
Commercial
$
3,732
$
2,678
$
732
$
3,410
$
82
Commercial Real Estate
2,993
1,840
1,153
2,993
22
Agriculture
—
—
—
—
—
Residential Mortgage
5,167
1,940
2,714
4,654
448
Residential Construction
1,141
—
1,091
1,091
370
Consumer
1,162
343
625
968
103
Total
$
14,195
$
6,801
$
6,315
$
13,116
$
1,025
December 31, 2012
Commercial
$
3,628
$
2,769
$
519
$
3,288
$
95
Commercial Real Estate
3,629
1,872
1,170
3,042
26
Agriculture
—
—
—
—
—
Residential Mortgage
5,831
1,860
2,963
4,823
417
Residential Construction
1,148
—
1,097
1,097
433
Consumer
1,416
502
629
1,131
101
Total
$
15,652
$
7,003
$
6,378
$
13,381
$
1,072
Interest income on impaired loans recognized using cash basis accounting
Interest income on impaired loans recognized using a cash-basis method of accounting during the three-month periods ended March 31, 2013 and March 2012 was as follows:
 
($ in thousands)
Three Months Ended
March 31, 2013
Three Months Ended
March 31, 2012
Average
Recorded
Investment
Interest
Income
Recognized
Average
Recorded
Investment
Interest
Income
Recognized
Commercial
$
3,531
$
8
$
3,642
$
10
Commercial Real Estate
4,018
22
7,175
23
Agriculture
345
—
1,823
25
Residential Mortgage
4,592
27
4,878
29
Residential Construction
1,115
11
1,318
13
Consumer
1,009
8
622
7
Total
$
14,610
$
76
$
19,458
$
107
 
 
Loans modified as troubled debt restructurings
Loans modified as troubled debt restructurings during the three-month periods ended March 31, 2013 and March 31, 2012 were as follows:
 
($ in thousands)
 
Three Months Ended March 31, 2013
 
 
Number of
Contracts
 
 
Pre-modification
outstanding recorded
investment
 
 
Post-modification
outstanding
recorded investment
 
Commercial
 
 
1
 
 
$
244
 
 
$
244
 
Total
 
 
1
 
 
$
244
 
 
$
244
 
 
($ in thousands)
 
Three Months Ended March 31, 2012
 
 
Number of
Contracts
 
 
Pre-modification
outstanding recorded
investment
 
 
Post-modification
outstanding
recorded investment
 
Commercial
 
 
2
 
 
$
220
 
 
$
220
 
Consumer
 
 
2
 
 
 
151
 
 
 
151
 
Total
 
 
4
 
 
$
371
 
 
$
371
 
 
Loans by risk rating
The following table presents the risk ratings by loan class as of March 31, 2013 and December 31, 2012.
 
($ in thousands)
 
Pass
 
 
Special Mention
 
 
Substandard
 
 
Doubtful
 
 
Loss
 
 
Total
 
March 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
84,915
 
 
$
3,735
 
 
$
5,603
 
 
$
—
 
 
$
—
 
 
$
94,253
 
Commercial Real Estate
 
 
177,639
 
 
 
9,225
 
 
 
9,217
 
 
 
—
 
 
 
—
 
 
 
196,081
 
Agriculture
 
 
37,080
 
 
 
152
 
 
 
2,780
 
 
 
—
 
 
 
—
 
 
 
40,012
 
Residential Mortgage
 
 
47,032
 
 
 
1,146
 
 
 
3,582
 
 
 
—
 
 
 
—
 
 
 
51,760
 
Residential Construction
 
 
5,709
 
 
 
2,012
 
 
 
263
 
 
 
—
 
 
 
—
 
 
 
7,984
 
Consumer
 
 
50,831
 
 
 
4,444
 
 
 
2,278
 
 
 
—
 
 
 
—
 
 
 
57,553
 
Total
 
$
403,206
 
 
$
20,714
 
 
$
23,723
 
 
$
—
 
 
$
—
 
 
$
447,643
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
78,078
 
 
$
4,393
 
 
$
6,339
 
 
$
—
 
 
$
—
 
 
$
88,810
 
Commercial Real Estate
 
 
170,676
 
 
 
9,049
 
 
 
8,701
 
 
 
—
 
 
 
—
 
 
 
188,426
 
Agriculture
 
 
49,613
 
 
 
172
 
 
 
2,962
 
 
 
—
 
 
 
—
 
 
 
52,747
 
Residential Mortgage
 
 
45,962
 
 
 
604
 
 
 
4,700
 
 
 
—
 
 
 
—
 
 
 
51,266
 
Residential Construction
 
 
5,512
 
 
 
1,212
 
 
 
862
 
 
 
—
 
 
 
—
 
 
 
7,586
 
Consumer
 
 
51,444
 
 
 
4,822
 
 
 
3,054
 
 
 
73
 
 
 
—
 
 
 
59,393
 
Total
 
$
401,285
 
 
$
20,252
 
 
$
26,618
 
 
$
73
 
 
$
—
 
 
$
448,228
 
Allowance for loan losses
The following table details activity in the allowance for loan losses by loan class for the three-month periods ended March 31, 2013 and March 31, 2012.

Three-month period ended March 31, 2013
 
($ in thousands)
 
Commercial
 
 
Commercial
Real Estate
 
 
Agriculture
 
 
Residential
Mortgage
 
 
Residential
Construction
 
 
Consumer
 
 
Unallocated
 
 
Total
 
Balance as of December 31, 2012
 
$
2,899
 
 
$
1,723
 
 
$
915
 
 
$
1,148
 
 
$
724
 
 
$
1,110
 
 
$
35
 
 
$
8,554
 
Provision for loan losses
 
 
25
 
 
 
371
 
 
 
(104
)
 
 
(97
)
 
 
(175
)
 
 
(13
)
 
 
393
 
 
 
400
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
 
 
(111
)
 
 
—
 
 
 
(1
)
 
 
(78
)
 
 
—
 
 
 
(58
)
 
 
—
 
 
 
(248
)
Recoveries
 
 
75
 
 
 
1
 
 
 
3
 
 
 
—
 
 
 
41
 
 
 
20
 
 
 
—
 
 
 
140
 
Net charge-offs
 
 
(36
)
 
 
1
 
 
 
2
 
 
 
(78
)
 
 
41
 
 
 
(38
)
 
 
—
 
 
 
(108
)
Balance as of March 31, 2013
 
 
2,888
 
 
 
2,095
 
 
 
813
 
 
 
973
 
 
 
590
 
 
 
1,059
 
 
 
428
 
 
 
8,846
 
Period-end amount allocated to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
 
 
82
 
 
 
22
 
 
 
—
 
 
 
448
 
 
 
370
 
 
 
103
 
 
 
—
 
 
 
1,025
 
Loans collectively evaluated for impairment
 
 
2,806
 
 
 
2,073
 
 
 
813
 
 
 
525
 
 
 
220
 
 
 
956
 
 
 
428
 
 
 
7,821
 
Balance as of March 31, 2013
 
$
2,888
 
 
$
2,095
 
 
$
813
 
 
$
973
 
 
$
590
 
 
$
1,059
 
 
$
428
 
 
$
8,846
 


Three-month period ended March 31, 2012
 
($ in thousands)
 
Commercial
 
 
Commercial
Real Estate
 
 
Agriculture
 
 
Residential
Mortgage
 
 
Residential
Construction
 
 
Consumer
 
 
Unallocated
 
 
Total
 
Balance as of December 31, 2011
 
$
3,598
 
 
$
1,747
 
 
$
1,934
 
 
$
1,135
 
 
$
1,198
 
 
$
796
 
 
$
—
 
 
$
10,408
 
Provision for loan losses
 
 
320
 
 
 
(32
)
 
 
(769
)
 
 
90
 
 
 
(74
)
 
 
781
 
 
 
234
 
 
 
550
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
 
 
(542
)
 
 
—
 
 
 
—
 
 
 
(31
)
 
 
—
 
 
 
(264
)
 
 
—
 
 
 
(837
)
Recoveries
 
 
206
 
 
 
—
 
 
 
2
 
 
 
—
 
 
 
1
 
 
 
27
 
 
 
—
 
 
 
236
 
Net charge-offs
 
 
(336
)
 
 
—
 
 
 
2
 
 
 
(31
)
 
 
1
 
 
 
(237
)
 
 
—
 
 
 
(601
)
Balance as of March 31, 2012
 
 
3,582
 
 
 
1,715
 
 
 
1,167
 
 
 
1,194
 
 
 
1,125
 
 
 
1,340
 
 
 
234
 
 
 
10,357
 
Period-end amount allocated to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
 
 
368
 
 
 
199
 
 
 
—
 
 
 
636
 
 
 
737
 
 
 
394
 
 
 
—
 
 
 
2,334
 
Loans collectively evaluated for impairment
 
 
3,214
 
 
 
1,516
 
 
 
1,167
 
 
 
558
 
 
 
388
 
 
 
946
 
 
 
234
 
 
 
8,023
 
Balance as of March 31, 2012
 
$
3,582
 
 
$
1,715
 
 
$
1,167
 
 
$
1,194
 
 
$
1,125
 
 
$
1,340
 
 
$
234
 
 
$
10,357
 
 
The following table details activity in the allowance for loan losses and the amount allocated to loans individually and collectively evaluated for impairment as of and for the period ended December 31, 2012.
 
($ in thousands)
 
Commercial
 
 
Commercial
Real Estate
 
 
Agriculture
 
 
Residential
Mortgage
 
 
Residential
Construction
 
 
Consumer
 
 
Unallocated
 
 
Total
 
Balance as of December 31, 2011
 
$
3,598
 
 
$
1,747
 
 
$
1,934
 
 
$
1,135
 
 
$
1,198
 
 
$
796
 
 
$
—
 
 
$
10,408
 
Provision for loan losses
 
 
2,493
 
 
 
351
 
 
 
(907
)
 
 
877
 
 
 
(648
)
 
 
1,075
 
 
 
35
 
 
 
3,276
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
 
 
(3,498
)
 
 
(375
)
 
 
(116
)
 
 
(864
)
 
 
(167
)
 
 
(875
)
 
 
—
 
 
 
(5,895
)
Recoveries
 
 
306
 
 
 
—
 
 
 
4
 
 
 
—
 
 
 
341
 
 
 
114
 
 
 
—
 
 
 
765
 
Net charge-offs
 
 
(3,192
)
 
 
(375
)
 
 
(112
)
 
 
(864
)
 
 
174
 
 
 
(761
)
 
 
—
 
 
 
(5,130
)
Balance as of December 31, 2012
 
 
2,899
 
 
 
1,723
 
 
 
915
 
 
 
1,148
 
 
 
724
 
 
 
1,110
 
 
 
35
 
 
 
8,554
 
Period-end amount allocated to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
 
 
95
 
 
 
26
 
 
 
—
 
 
 
417
 
 
 
433
 
 
 
101
 
 
 
—
 
 
 
1,072
 
Loans collectively evaluated for impairment
 
 
2,804
 
 
 
1,697
 
 
 
915
 
 
 
731
 
 
 
291
 
 
 
1,009
 
 
 
35
 
 
 
7,482
 
Balance as of December 31, 2012
 
$
2,899
 
 
$
1,723
 
 
$
915
 
 
$
1,148
 
 
$
724
 
 
$
1,110
 
 
$
35
 
 
$
8,554
 
 
The Company's investment in loans as of March 31, 2013, March 31, 2012, and December 31, 2012 related to each balance in the allowance for loan losses by loan class and disaggregated on the basis of the Company's impairment methodology was as follows:
 
($ in thousands)
 
Commercial
 
 
Commercial
Real Estate
 
 
Agriculture
 
 
Residential
Mortgage
 
 
Residential
Construction
 
 
Consumer
 
 
Total
 
March 31, 2013
 
Loans individually evaluated for impairment
 
$
3,410
 
 
$
2,993
 
 
$
—
 
 
$
4,654
 
 
$
1,091
 
 
$
968
 
 
$
13,116
 
Loans collectively evaluated for impairment
 
 
90,843
 
 
 
193,088
 
 
 
40,012
 
 
 
47,106
 
 
 
6,893
 
 
 
56,585
 
 
 
434,527
 
Ending Balance
 
$
94,253
 
 
$
196,081
 
 
$
40,012
 
 
$
51,760
 
 
$
7,984
 
 
$
57,553
 
 
$
447,643
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2012
 
Loans individually evaluated for impairment
 
$
3,840
 
 
$
4,670
 
 
$
1,570
 
 
$
3,534
 
 
$
1,294
 
 
$
942
 
 
$
15,850
 
Loans collectively evaluated for impairment
 
 
85,130
 
 
 
172,588
 
 
 
36,443
 
 
 
48,454
 
 
 
6,521
 
 
 
61,863
 
 
 
410,999
 
Ending Balance
 
$
88,970
 
 
$
177,258
 
 
$
38,013
 
 
$
51,988
 
 
$
7,815
 
 
$
62,805
 
 
$
426,849
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
 
Loans individually evaluated for impairment
 
$
3,288
 
 
$
3,042
 
 
$
—
 
 
$
4,823
 
 
$
1,097
 
 
$
1,131
 
 
$
13,381
 
Loans collectively evaluated for impairment
 
 
85,522
 
 
 
185,384
 
 
 
52,747
 
 
 
46,443
 
 
 
6,489
 
 
 
58,262
 
 
 
434,847
 
Ending Balance
 
$
88,810
 
 
$
188,426
 
 
$
52,747
 
 
$
51,266
 
 
$
7,586
 
 
$
59,393
 
 
$
448,228