LOANS (Tables)

9 Months Ended

Sep. 30, 2013

The composition of the Company’s loan portfolio, by loan class, is as follows:

($ in thousands)	September 30, 2013			December 31, 2012

Commercial	$	106,751		$	88,810
Commercial Real Estate		230,284			188,426
Agriculture		49,657			52,747
Residential Mortgage		52,844			51,266
Residential Construction		9,554			7,586
Consumer		55,870			59,393

		504,960			448,228
Allowance for loan losses		(8,792	)		(8,554	)
Net deferred origination fees and costs		1,088			775

Loans, net	$	497,256		$	440,449

Non-accrual loans by loan class

The Company’s non-accrual loans by loan class, as of September 30, 2013 and December 31, 2012 were as follows:

($ in thousands)	September 30, 2013		December 31, 2012

Commercial	$	2,633	$	2,853
Commercial Real Estate		1,943		1,879
Residential Mortgage		2,216		2,095
Residential Construction		99		—
Consumer		231		441

	$	7,122	$	7,268

Aging analysis of past due loans, by loan class

An age analysis of past due loans, segregated by loan class, as of September 30, 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
September 30, 2013
Commercial	$	129	$	145	$	89	$	363	$	106,388	$	106,751
Commercial Real Estate		341		51		531		923		229,361		230,284
Agriculture		—		—		—		—		49,657		49,657
Residential Mortgage		1,690		212		123		2,025		50,819		52,844
Residential Construction		40		9		—		49		9,505		9,554
Consumer		33		46		39		118		55,752		55,870
Total	$	2,233	$	463	$	782	$	3,478	$	501,482	$	504,960

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

Impaired loans, segregated by loan class, as of September 30, 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
September 30, 2013
Commercial	$	3,724	$	2,469	$	941	$	3,410	$	107
Commercial Real Estate		3,081		1,943		1,135		3,078		20
Agriculture		—		—		—		—		—
Residential Mortgage		6,596		2,216		3,431		5,647		622
Residential Construction		1,129		99		856		955		252
Consumer		921		291		612		903		74
Total	$	15,451	$	7,018	$	6,975	$	13,993	$	1,075

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 accrual basis accounting

The average recorded investment in impaired loans and the amount of interest income recognized on impaired loans during the three-month periods ended September 30, 2013 and September 30, 2012 was as follows:

($ in thousands)	Three Months Ended September 30, 2013				Three Months Ended September 30, 2012
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial	$	3,335	$	10	$	3,713	$	8
Commercial Real Estate		3,341		22		5,019		23
Agriculture		—		—		449		—
Residential Mortgage		5,796		42		4,446		39
Residential Construction		961		10		1,137		12
Consumer		896		14		949		4
Total	$	14,329	$	98	$	15,713	$	86

The average recorded investment in impaired loans and the amount of interest income recognized on impaired loans during the nine-month periods ended September 30, 2013 and September 30, 2012 was as follows:

($ in thousands)	Nine Months Ended September 30, 2013				Nine Months Ended September 30, 2012
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial	$	3,342	$	29	$	3,689	$	28
Commercial Real Estate		3,180		65		4,745		68
Agriculture		—		—		1,517		—
Residential Mortgage		5,267		103		4,374		98
Residential Construction		1,027		33		1,178		38
Consumer		974		30		874		21
Total	$	13,790	$	260	$	16,377	$	253

Loans modified as troubled debt restructurings

Loans modified as troubled debt restructurings during the three-month periods ended September 30, 2013 and September 30, 2012 were as follows:

($ in thousands)	Three Months Ended September 30, 2013
	Number of Contracts		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
Commercial		1	$	149	$	149
Consumer		3		233		233
Total		4	$	382	$	382

($ in thousands)	Three Months Ended September 30, 2012
	Number of Contracts		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
Consumer		2	$	142	$	142
Total		2	$	142	$	142

Loans modified as troubled debt restructurings during the nine-month periods ended September 30, 2013 and September 30, 2012 were as follows:

($ in thousands)	Nine Months Ended September 30, 2013
	Number of Contracts		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
Commercial		2	$	393	$	393
Residential Mortgage		1		568		377
Consumer		3		233		233
Total		6	$	1,194	$	1,003

($ in thousands)	Nine months Ended September 30, 2012
	Number of Contracts		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
Commercial		4	$	361	$	361
Commercial Real Estate		1		1,188		1,188
Residential Mortgage		1		806		806
Consumer		6		572		572
Total		12	$	2,927	$	2,927

Loans by risk rating

The following table presents the risk ratings by loan class as of September 30, 2013 and December 31, 2012.

($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Loss		Total
September 30, 2013
Commercial	$	97,650	$	3,898	$	5,203	$	—	$	—	$	106,751
Commercial Real Estate		213,267		6,687		10,330		—		—		230,284
Agriculture		46,993		—		2,664		—		—		49,657
Residential Mortgage		48,650		796		3,398		—		—		52,844
Residential Construction		8,020		—		1,534		—		—		9,554
Consumer		49,360		4,214		2,296		—		—		55,870
Total	$	463,940	$	15,595	$	25,425	$	—	$	—	$	504,960

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 and nine-month periods ended September 30, 2013.

Three-month period ended September 30, 2013
($ in thousands)	Commercial			Commercial Real Estate		Agriculture			Residential Mortgage			Residential Construction			Consumer			Unallocated			Total
Balance as of June, 30, 2013	$	2,869		$	2,037	$	748		$	1,054		$	503		$	1,041		$	474		$	8,726
Provision for loan losses		191			309		(137	)		(127	)		(70	)		126			(292	)		—

Charge-offs		(1	)		—		—			—			—			(115	)		—			(116	)
Recoveries		25			—		—			145			1			11			—			182
Net charge-offs		24			—		—			145			1			(104	)		—			66
Balance as of September 30, 2013	$	3,084		$	2,346	$	611		$	1,072		$	434		$	1,063		$	182		$	8,792

Nine-month period ended September 30, 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		149			575			(306	)		100			(207	)		342			147		800

Charge-offs		(113	)		(3	)		(1	)		(333	)		(127	)		(491	)		—		(1,068	)
Recoveries		149			51			3			157			44			102			—		506
Net charge-offs		36			48			2			(176	)		(83	)		(389	)		—		(562	)
Balance as of September 30, 2013	$	3,084		$	2,346		$	611		$	1,072		$	434		$	1,063		$	182	$	8,792

The following table details the allowance for loan losses allocated to loans individually and collectively evaluated for impairment by loan class as of September 30, 2013.

($ in thousands)	Commercial		Commercial Real Estate		Agriculture		Residential Mortgage		Residential Construction		Consumer		Unallocated		Total
Period-end amount allocated to:	$		$		$		$		$		$		$		$
Loans individually evaluated for impairment		107		20		—		622		252		74		—		1,075
Loans collectively evaluated for impairment		2,977		2,326		611		450		182		989		182		7,717
Ending Balance	$	3,084	$	2,346	$	611	$	1,072	$	434	$	1,063	$	182	$	8,792

The following table details activity in the allowance for loan losses by loan class for the three-month and nine-month periods ended September 30, 2012.

Three-month period ended September 30, 2012
($ in thousands)	Commercial			Commercial Real Estate			Agriculture			Residential Mortgage			Residential Construction			Consumer			Unallocated		Total
Balance as of June 30, 2012	$	2,782		$	2,062		$	1,126		$	1,616		$	934		$	1,101		$	163	$	9,784
Provision for loan losses		341			203			(244	)		223			(102	)		100			304		825

Charge-offs		(25	)		(4	)		—			(833	)		—			(34	)		—		(896	)
Recoveries		41			—			—			—			36			27			—		104
Net charge-offs		16			(4	)		—			(833	)		36			(7	)		—		(792	)
Balance as of September 30, 2012		3,139			2,261			882			1,006			868			1,194			467		9,817

Nine-month period ended September 30, 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		367			860			(940	)		735			(429	)		991			467		2,051

Charge-offs		(1,104	)		(346	)		(115	)		(864	)		(161	)		(668	)		—		(3,258	)
Recoveries		278			—			3			—			260			75			—		616
Net charge-offs		(826	)		(346	)		(112	)		(864	)		99			(593	)		—		(2,642	)
Balance as of September 30, 2012		3,139			2,261			882			1,006			868			1,194			467		9,817

The following table details the allowance for loan losses allocated to loans individually and collectively evaluated for impairment by loan class as of September 30, 2012.

($ in thousands)	Commercial		Commercial Real Estate		Agriculture		Residential Mortgage		Residential Construction		Consumer		Unallocated		Total
Period-end amount allocated to:
Loans individually evaluated for impairment		152		19		—		497		563		86		—		1,317
Loans collectively evaluated for impairment		2,987		2,242		882		509		305		1,108		467		8,500
Ending Balance	$	3,139	$	2,261	$	882	$	1,006	$	868	$	1,194	$	467	$	9,817

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 September 30, 2013, September 30, 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
September 30, 2013
Loans individually evaluated for impairment	$	3,410	$	3,078	$	—	$	5,647	$	955	$	903	$	13,993
Loans collectively evaluated for impairment		103,341		227,206		49,657		47,197		8,599		54,967		490,967
Ending Balance	$	106,751	$	230,284	$	49,657	$	52,844	$	9,554	$	55,870	$	504,960

September 30, 2012
Loans individually evaluated for impairment	$	3,604	$	4,800	$	—	$	4,905	$	1,147	$	864	$	15,320
Loans collectively evaluated for impairment		90,284		187,950		49,103		44,747		6,435		60,008		438,527
Ending Balance	$	93,888	$	192,750	$	49,103	$	49,652	$	7,582	$	60,872	$	453,847

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