Loans and Allowance for Loan Losses:

The components of loans receivable are as follows (in thousands):



	December 31, 2012
	Loans Receivable			%		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Commercial	$	121,307		23.0	%	$	6,133	$	115,174
Commercial real estate	186,844			35.4	%	3,373		183,471
Commercial construction	3,832			0.7	%	—		3,832
Land and land development loans	31,278			5.9	%	2,023		29,255
Agriculture	85,967			16.3	%	2,134		83,833
Multifamily	16,544			3.1	%	—		16,544
Residential real estate	60,020			11.3	%	2,362		57,658
Residential construction	940			0.2	%	—		940
Consumer	9,626			1.8	%	168		9,458
Municipal	12,267			2.3	%	—		12,267
Total loans receivable	528,625			100.0	%	$	16,193	$	512,432
Allowance for loan losses	(7,943		)
Deferred loan fees, net of direct origination costs	86
Loans receivable, net	$	520,768
Weighted average interest rate	5.28		%



	December 31, 2011
	Loans Receivable			%		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Commercial	$	110,395		21.4	%	$	8,585	$	101,810
Commercial real estate	167,586			32.6	%	10,918		156,668
Commercial construction	6,335			1.2	%	747		5,588
Land and land development loans	38,499			7.5	%	5,173		33,326
Agriculture	81,316			15.8	%	2,423		78,893
Multifamily	26,038			5.1	%	—		26,038
Residential real estate	58,861			11.4	%	4,013		54,848
Residential construction	2,742			0.5	%	—		2,742
Consumer	11,847			2.3	%	276		11,571
Municipal	11,063			2.2	%	—		11,063
Total loans receivable	514,682			100.0	%	$	32,135	$	482,547
Allowance for loan losses	(12,690		)
Deferred loan fees, net of direct origination costs	260
Loans receivable, net	$	502,252
Weighted average interest rate	6.04		%

The components of the allowance for loan loss by types are as follows (in thousands):



	December 31, 2012
	Total Allowance		Individually Evaluated Allowance		Collectively Evaluated Allowance
Commercial	$	2,156	$	628	$	1,528
Commercial real estate	2,762		267		2,495
Commercial construction	101		—		101
Land and land development loans	1,197		114		1,083
Agriculture	228		10		218
Multifamily	51		—		51
Residential real estate	1,144		458		686
Residential construction	24		—		24
Consumer	202		87		115
Municipal	78		—		78
Total	$	7,943	$	1,564	$	6,379



	December 31, 2011
	Total Allowance		Individually Evaluated Allowance		Collectively Evaluated Allowance
Commercial	$	2,817	$	1,300	$	1,517
Commercial real estate	4,880		2,804		2,076
Commercial construction	500		252		248
Land and land development loans	2,273		728		1,545
Agriculture	172		32		140
Multifamily	91		—		91
Residential real estate	1,566		939		627
Residential construction	59		—		59
Consumer	295		195		100
Municipal	37		—		37
Total	$	12,690	$	6,250	$	6,440

A summary of current, past due and nonaccrual loans as of December 31, 2012 is as follows, (in thousands):



	Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Nonaccrual		Total
Commercial	$	117,096	$	169	$	—	$	4,042	$	121,307
Commercial real estate	185,128		—		—		1,716		186,844
Commercial construction	3,832		—		—		—		3,832
Land and land development loans	31,032		—		—		246		31,278
Agriculture	85,835		34		—		98		85,967
Multifamily	16,544		—		—		—		16,544
Residential real estate	59,158		439		—		423		60,020
Residential construction	940		—		—		—		940
Consumer	9,577		45		—		4		9,626
Municipal	12,267		—		—		—		12,267
Total	$	521,409	$	687	$	—	$	6,529	$	528,625

A summary of current, past due and nonaccrual loans as of December 31, 2011 is as follows, (in thousands):



	Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Nonaccrual		Total
Commercial	$	106,509	$	200	$	—	$	3,686	$	110,395
Commercial real estate	164,578		705		—		2,303		167,586
Commercial construction	6,289		—		—		46		6,335
Land and land development loans	35,835		12		—		2,652		38,499
Agriculture	81,129		—		—		187		81,316
Multifamily	26,038		—		—		—		26,038
Residential real estate	58,037		423		—		401		58,861
Residential construction	2,742		—		—		—		2,742
Consumer	11,739		91		—		17		11,847
Municipal	11,063		—		—		—		11,063
Total	$	503,959	$	1,431	$	—	$	9,292	$	514,682

The following table provides a summary of Troubled Debt Restructurings ("TDR") outstanding at period end by performing status, (in thousands).



	December 31, 2012						December 31, 2011
Troubled Debt Restructurings	Nonaccrual		Accrual		Total		Nonaccrual		Accrual			Total
Commercial	$	1,900	$	277	$	2,177	$	371	$	1,071		$	1,442
Commercial real estate	1,463		956		2,419		1,889		498			2,387
Commercial construction	—		—		—		46		295			341
Land and land development loans	—		1,327		1,327		782		794			1,576
Agriculture	—		291		291		22		—		.	22
Residential real estate	—		417		417		—		1,377			1,377
Consumer	—		88		88		27		64			91
Total	$	3,363	$	3,356	$	6,719	$	3,137	$	4,099		$	7,236

The Company's loans that were modified in the twelve month period ended December 31, 2012 and 2011 and considered a TDR are as follows (dollars in thousands):



	Twelve Months Ended December 31, 2012					Twelve Months Ended December 31, 2011
	Number	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Commercial	3	$	1,938	$	1,938	6	$	558	$	558
Commercial real estate	3	2,558		2,558		2	382		382
Land and land development loans	2	73		73		10	3,159		2,190
Agriculture	2	291		291		1	58		58
Residential real estate	1	170		170		7	948		948
Consumer	1	55		55		5	113		113
	12	$	5,085	$	5,085	31	$	5,218	$	4,249

The balances below provide information as to how the loans were modified as TDRs during the twelve months ended December 31, 2012 and 2011 (in thousands).



	Twelve Months Ended December 31, 2012				Twelve Months Ended December 31, 2011
	Adjusted Interest Rate Only		Other*		Adjusted Interest Rate Only		Other*
Commercial	$	75	$	1,863	$	558	$	—
Commercial real estate	214		2,344		382		—
Land and land development loans	73		—		1,041		1,149
Agriculture	291		—		—		58
Residential real estate	170		—		912		36
Residential construction	—		—		—		—
Consumer	55		—		113		—
	$	878	$	4,207	$	3,006	$	1,243
(*) Other includes term or principal concessions or a combination of concessions, including interest rates.

As of December 31, 2012, the Company had specific reserves of $763,000 on TDRs, and there were no TDRs in default as compared to specific reserves of $930,000 and one TDR in default totaling $52,000 as of December 31, 2011.

The allowance for loan losses and reserve for unfunded commitments are maintained at levels considered adequate by management to provide for probable loan losses as of the reporting dates. The allowance for loan losses and reserve for unfunded commitments are based on management’s assessment of various factors affecting the loan portfolio, including problem loans, business conditions and loss experience, and an overall evaluation of the quality of the underlying collateral. Changes in the allowance for loan losses and the reserve for unfunded commitments during the twelve month periods ended December 31, 2012 and 2011 are as follows:



	Allowance for Loan Losses for the twelve months ended December 31, 2012
	Balance, Beginning of Year		Charge-Offs Jan 1 through Dec 31, 2012			Recoveries Jan 1 through Dec 31, 2012		Provision			Balance, End of Period
	(Dollars in thousands)
Commercial	$	2,817	$	(2,649	)	$	453	$	1,535		$	2,156
Commercial real estate	4,880		(4,548		)	466		1,964			2,762
Commercial construction	500		(243		)	10		(166		)	101
Land and land development loans	2,273		(1,601		)	283		242			1,197
Agriculture	172		(32		)	117		(29		)	228
Multifamily	91		—			—		(40		)	51
Residential real estate	1,566		(1,256		)	196		638			1,144
Residential construction	59		—			7		(42		)	24
Consumer	295		(422		)	166		163			202
Municipal	37		—			—		41			78
Allowance for loan losses	$	12,690	$	(10,751	)	$	1,698	$	4,306		$	7,943



	Allowance for Loan Losses for the twelve months ended December 31, 2011
	Balance, Beginning of Year		Charge-Offs Jan 1 through Dec 31, 2011			Recoveries Jan 1 through Dec 31, 2011		Provision			Balance, End of Period
	(Dollars in thousands)
Commercial	$	2,925	$	(1,366	)	$	755	$	503		$	2,817
Commercial real estate	3,655		(2,594		)	293		3,526			4,880
Commercial construction	540		(217		)	3		174			500
Land and land development loans	2,408		(3,056		)	507		2,414			2,273
Agriculture	779		(400		)	103		(310		)	172
Multifamily	83		—			—		8			91
Residential real estate	1,252		(757		)	157		914			1,566
Residential construction	65		(34		)	—		28			59
Consumer	613		(624		)	176		130			295
Municipal	135		—			—		(98		)	37
Allowances for loan losses	$	12,455	$	(9,048	)	$	1,994	$	7,289		$	12,690



	Allowance for Loan Losses December 31, 2010
	Balance, Beginning of Year		Charge-Offs Jan 1 through Dec 31, 2010			Recoveries Jan 1 through Dec 31, 2010		Provision			Balance, End of Period
	(Dollars in thousands)
Commercial	$	4,785	$	(10,603	)	$	628	$	8,115		$	2,925
Commercial real estate	3,827		(5,610		)	311		5,127			3,655
Commercial construction	1,671		(1,393		)	391		(129		)	540
Land and land development loans	2,707		(8,622		)	175		8,148			2,408
Agriculture	1,390		(1,055		)	31		413			779
Multifamily	26		(16		)	—		73			83
Residential real estate	1,412		(2,019		)	50		1,809			1,252
Residential construction	170		(101		)	—		(4		)	65
Consumer	539		(490		)	158		406			613
Municipal	81		—			—		54			135
Allowances for loan losses	$	16,608	$	(29,909	)	$	1,744	$	24,012		$	12,455

Allowance for Unfunded Commitments



	Twelve Months Ended December 31,
	2012		2011			2010
	(Dollars in thousands)
Beginning of period	$	13	$	17		$	11
Adjustment	2		(4		)	6
Allowance — Unfunded Commitments at end of period	$	15	$	13		$	17

Management's policy is to charge off loans or portions of loans as soon as an identifiable loss amount can be determined from evidence obtained, such as current cash flow information, updated appraisals or similar real estate evaluations, equipment, inventory or similar collateral evaluations, accepted offers on loan sales or negotiated discounts, and/or guarantor asset valuations. In situations where problem loans are dependent on collateral liquidation for repayment, management obtains updated independent valuations, such as appraisals or broker opinions, generally no less frequently than once every twelve months and more frequently for larger or more troubled loans. In the time period between these independent valuations, the Company monitors market conditions for any significant event or events that would materially change the valuations, and updates them as appropriate. If the valuations suggest an increase in collateral values, the Company does not recover prior amounts charged off until the assets are actually sold and the increase realized. However, if the updated valuations suggest additional loss, the Company charges off the additional amount.

The following tables summarize impaired loans:



	Impaired Loans
	December 31, 2012						December 31, 2011
	Recorded Investment		Principal Balance		Related Allowance		Recorded Investment		Principal Balance		Related Allowance
	(Dollars in thousands)
With an allowance recorded:
Commercial	$	1,796	$	1,964	$	628	$	2,942	$	3,323	$	1,300
Commercial real estate	1,315		1,486		267		7,439		8,732		2,804
Commercial construction	—		—		—		747		902		252
Land and land development loans	1,601		1,627		114		1,745		3,237		728
Agriculture	31		31		10		32		405		32
Residential real estate	1,240		1,243		458		1,928		2,165		939
Consumer	138		140		87		247		264		195
Total	$	6,121	$	6,491	$	1,564	$	15,080	$	19,028	$	6,250
Without an allowance recorded:
Commercial	$	4,337	$	6,273	$	—	$	5,643	$	9,099	$	—
Commercial real estate	2,058		3,178		—		3,479		5,038		—
Commercial construction	—		—		—		—		198		—
Land and land development loans	422		493		—		3,428		6,165		—
Agriculture	2,103		2,103		—		2,391		2,512		—
Multifamily	—		—		—		—		—		—
Residential real estate	1,122		1,254		—		2,085		2,296		—
Consumer	30		48		—		29		56		—
Total	$	10,072	$	13,349	$	—	$	17,055	$	25,364	$	—
Total:
Commercial	$	6,133	$	8,237	$	628	$	8,585	$	12,422	$	1,300
Commercial real estate	3,373		4,664		267		10,918		13,770		2,804
Commercial construction	—		—		—		747		1,100		252
Land and land development loans	2,023		2,120		114		5,173		9,402		728
Agriculture	2,134		2,134		10		2,423		2,917		32
Residential real estate	2,362		2,497		458		4,013		4,461		939
Consumer	168		188		87		276		320		195
Total	$	16,193	$	19,840	$	1,564	$	32,135	$	44,392	$	6,250



	Impaired Loans
	Twelve Months Ended December 31, 2012				Twelve Months Ended December 31, 2011
	Average Recorded Investment		Interest Income Recognized (*)		Average Recorded Investment		Interest Income Recognized (*)
	(Dollars in thousands)
With an allowance recorded:
Commercial	$	2,821	$	136	$	3,114	$	251
Commercial real estate	4,369		106		7,319		663
Commercial construction	240		—		774		71
Land and land development loans	2,003		107		2,732		296
Agriculture	25		4		147		72
Residential real estate	1,606		80		1,555		131
Residential construction	—		—		29		—
Consumer	199		10		438		24
Total	$	11,263	$	443	$	16,108	$	1,508
Without an allowance recorded:
Commercial	$	5,046	$	562	$	7,524	$	1,075
Commercial real estate	2,232		265		4,880		587
Commercial construction	59		—		298		25
Land and land development loans	1,699		53		4,816		476
Agriculture	2,242		181		1,669		305
Residential real estate	1,496		112		2,054		180
Residential construction	—		—		122		—
Consumer	33		5		190		6
Total	$	12,807	$	1,178	$	21,553	$	2,654
Total:
Commercial	$	7,867	$	698	$	10,638	$	1,326
Commercial real estate	6,601		371		12,199		1,250
Commercial construction	299		—		1,072		96
Land and land development loans	3,702		160		7,548		772
Agriculture	2,267		185		1,816		377
Residential real estate	3,102		192		3,609		311
Residential construction	—		—		151		—
Consumer	232		15		628		30
Total	$	24,070	$	1,621	$	37,661	$	4,162
(*) Interest Income on individually impaired loans is calculated using the cash-basis method, using year to date interest on loans outstanding at year end.

Loan Risk Factors

The following is a recap of the risk characteristics associated with each of the Company's major loan portfolio segments.

Commercial Loans: Commercial loans comprise $121.3 million, or 23% of the total loan portfolio. Although the impacts of the long economic downturn have increased losses and continue to heighten risk in the commercial portfolio, management does not consider the portfolio to present “concentration risk” at this time. Management believes there is adequate diversification by type, industry, and geography to mitigate excessive risk. The commercial portfolio includes a mix of term loan facilities and operating loans and lines made to a variety of different business types in the markets it serves. The Company utilizes SBA, USDA and other government-assisted or guaranteed financing programs whenever advantageous to further mitigate risk in this area. With the exception of the agricultural portfolio discussed in more detail below, there is no other significant concentration of industry types in its loan portfolio, and no dominant employer or industry across all the markets it serves. Underwriting focuses on the evaluation of potential future cash flows to cover debt requirements, sufficient collateral margins to buffer against devaluations, credit history of the business and its principals, and additional support from willing and capable guarantors.

Commercial Real Estate Loans: Commercial real estate loans comprise $186.8 million, or 35.4% of the total loan portfolio. Sluggish economic conditions and lower, but stabilizing real estate values continue to heighten risk in the non-residential component of the commercial real estate portfolio. However, in comparison to its national peer group and the risk that existed in its construction and development portfolio, the Company has less overall exposure to commercial real estate and a stronger mix of owner-occupied (where the borrower occupies and operates in at least part of the building) versus non-owner occupied loans. The loans represented in this category are spread across the Company's footprint, and there are no significant concentrations by industry type or borrower. The most significant property types represented in the portfolio are office 23.2%, industrial 14.6%, health care 12.0% and retail 10.1%. The other 40.1% is a mix of property types with smaller concentrations, including religious facilities, auto-related properties, restaurants, convenience stores, storage units, motels and commercial investment land. Finished condominiums comprise only 1.5% of the commercial real estate portfolio.

While 66.1% of the Company's commercial real estate portfolio is in its Northern Idaho/Eastern Washington region, this region is a large and diverse region with differing local economies and real estate markets. Given this diversity, and the diversity of property types and industries represented, management does not believe that this concentration represents a significant concentration risk.

Non-owner occupied commercial real estate loans are made only to projects with strong debt-service-coverage and lower loan-to-value ratios and/or to borrowers with established track records and the ability to fund potential project cash flow shortfalls from other income sources or liquid assets. Project due diligence is conducted by the Bank, to help provide for adequate contingencies, collateral and/or government guaranties. The Company has largely avoided speculative financing of investment properties, particularly of the types most vulnerable in the recent downturn, including investment office buildings and retail strip developments. Management believes geographic, borrower and property-type diversification, and prudent underwriting and monitoring standards applied by seasoned commercial lenders mitigate concentration risk in this segment, although general economic sluggishness continues to negatively impact results.

Construction and Development Loans: After the aggressive reduction efforts of the past few years, the land development and commercial construction loan components pose much lower concentration risk for the total loan portfolio, and now total $35.1 million, or 6.6% of the loan portfolio. The substantial portfolio reduction, combined with stabilizing housing prices, has reduced risk in this portfolio to a level where it no longer represents a significant concentration risk. Management is maintaining its aggressive resolution efforts to further reduce its risk.

Agricultural Loans: The agricultural portfolio represents a larger percentage of the loans in the Bank's southern Idaho region. At the end of the period, agricultural loans and agricultural real estate loans totaled $86.0 million or 16.3% of the total loan portfolio. The agricultural portfolio consists of loans secured by livestock, crops and real estate. Agriculture has typically been a cyclical industry with periods of both strong and weak performance. Current conditions are strong and are projected to remain solid for the next couple years, although rising input costs present some additional risk. To mitigate credit risk, specific underwriting is applied to retain only borrowers that have proven track records in the agricultural industry. Many of Intermountain's agricultural borrowers are third or fourth generation farmers and ranchers with limited real estate debt, which reduces overall debt coverage requirements and provides extra flexibility and collateral for equipment and operating borrowing needs. In addition, the Bank has hired senior lenders with significant experience in agricultural lending to administer these loans. Further mitigation is provided through frequent collateral inspections, adherence to farm operating budgets, and annual or more frequent review of financial performance. The Company has minimal exposure to the dairy industry, the significant agricultural segment that has been under extreme pressure for the past few years.

Multifamily: The multifamily segment comprises $16.5 million or 3.1% of the total loan portfolio at the end of the period. This portfolio represents relatively low risk for the Company, as a result of the strong current market for multifamily properties and low vacancy rates across the Company's footprint.

Residential Real Estate, Residential Construction and Consumer: Residential real estate, residential construction and consumer loans total $70.6 million or 13.3% of the total loan portfolio. Management does not believe they represent significant concentration risk. However, continuing high unemployment and loss of equity is putting pressure on segments of this portfolio, particularly home equity lines and second mortgages.

Municipal loans: Municipal loans comprise $12.3 million or 2.3% of the total loan portfolio. The small size of the portfolio and careful underwriting of the loans within it limit overall concentration risk in this segment.

Credit quality indicators

The risk grade analyses included as part of the Company's credit quality indicators for loans are developed through review of individual borrowers on an ongoing basis. Each loan is evaluated at the time of origination and each subsequent renewal. Loans with principal balances exceeding $500,000 are evaluated on a more frequent basis. Trigger events (such as loan delinquencies, updated financial information, customer contact, and significant collateral devaluation) also require an updated credit quality review. Loans with risk grades "Watch" through "Loss" as defined below are evaluated at least annually with more frequent evaluations often done as borrower, collateral or market conditions change. In situations where problem loans are dependent on collateral liquidation for repayment, management obtains updated independent valuations, generally no less frequently than once every twelve months and more frequently for larger or more troubled loans.

Other measurements used to assess credit quality, including delinquency statistics, non accrual and OREO levels, net chargeoff activity, and classified asset trends, are updated and evaluated monthly. The Company also performs various stress tests of its credit portfolio on a quarterly basis, which provide information on the potential impacts of various stress scenarios on the default and loss characteristics of the portfolio.

The Company's risk grades are defined as follows:

Satisfactory — A satisfactory rated loan is not adversely classified because it does not display any of the characteristics for adverse classification.

Watch — A watch loan has a solid but vulnerable repayment source. There is loss exposure only if the primary repayment source and collateral experience prolonged deterioration. Loans in this risk grade category are subject to frequent review and change due to the increased vulnerability of repayment sources and collateral valuations.

Special mention — A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention loans are not adversely classified and do not warrant adverse classification.

Substandard — A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful — A loan classified doubtful has all the weaknesses inherent in a loan classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values.

Loss — Loans classified as loss are considered uncollectible and of such little value that their continuing to be carried as an asset is not warranted. This classification does not necessarily mean that there is no potential for recovery or salvage value, but rather that it is not appropriate to defer a full write-off even though partial recovery may be realized in the future.

Credit quality indicators by loan segment are summarized as follows:



	Loan Portfolio Credit Grades by Type December 31, 2012
	Satisfactory Grade 1-3		Internal Watch Grade 4		Special Mention Grade 5		Substandard Grade 6		Doubtful Grade 7		Total
	(Dollars in thousands)
Commercial	$	90,520	$	23,094	$	—	$	7,693	$	—	$	121,307
Commercial real estate	132,659		49,029		—		5,156		—		186,844
Commercial construction	3,794		38		—		—		—		3,832
Land and land development loans	15,869		13,894		—		1,515		—		31,278
Agriculture	69,445		14,379		—		2,143		—		85,967
Multifamily	2,465		8,961		—		5,118		—		16,544
Residential real estate	47,102		9,873		—		3,045		—		60,020
Residential construction	940		—		—		—		—		940
Consumer	8,529		835		—		262		—		9,626
Municipal	12,125		142		—		—		—		12,267
Loans receivable, net	$	383,448	$	120,245	$	—	$	24,932	$	—	$	528,625



	Loan Portfolio Credit Grades by Type December 31, 2011
	Satisfactory Grade 1-3		Internal Watch Grade 4		Special Mention Grade 5		Substandard Grade 6		Doubtful Grade 7		Total
	(Dollars in thousands)
Commercial	$	65,843	$	32,293	$	—	$	12,259	$	—	$	110,395
Commercial real estate	107,984		43,305		—		16,297		—		167,586
Commercial construction	413		5,175		—		747		—		6,335
Land and land development loans	8,658		20,031		1,392		8,418		—		38,499
Agriculture	65,563		12,827		—		2,926		—		81,316
Multifamily	9,721		9,708		—		6,609		—		26,038
Residential real estate	43,419		10,066		—		5,376		—		58,861
Residential construction	2,742		—		—		—		—		2,742
Consumer	10,476		797		—		574		—		11,847
Municipal	11,063		—		—		—		—		11,063
Loans receivable, net	$	325,882	$	134,202	$	1,392	$	53,206	$	—	$	514,682

A summary of non-performing assets and classified loans at the dates indicated is as follows:



	December 31, 2012		December 31, 2011
	(Dollars in thousands)
Loans past due in excess of 90 days and still accruing	$	—	$	—
Non-accrual loans	6,529		9,292
Total non-performing loans	6,529		9,292
Other real estate owned (“OREO”)	4,951		6,650
Total non-performing assets (“NPAs”)	$	11,480	$	15,942
Classified loans (1)	$	24,933	$	53,206

_____________________________


1)	Classified loan totals are inclusive of non-performing loans and may also include troubled debt restructured loans, depending on the grading of these restructured loans.

Classified loans include non-performing loans and performing substandard loans where management believes that the loans may not return principal and interest per their original contractual terms. A loan that is classified may not necessarily result in a loss.

At December 31, 2012, the contractual principal payments due on outstanding loans receivable are shown below (in thousands). Actual payments may differ from expected payments because borrowers have the right to prepay loans, with or without prepayment penalties.



Year Ending December 31,	Amount
2013	$	138,310
2014	46,133
2015	34,092
2016	49,938
2017	49,345
Thereafter	210,807
	$	528,625

The Company sells mortgage loans and Small Business Administration loans in the secondary market. The sales volumes and the gains on sale of loans are shown below (in thousands):



	Years Ended December 31,
	2012		2011		2010
Loan volume sold	$	77,820	$	49,174	$	63,314
Gain on sale of loans	$	1,835	$	983	$	1,617

The following table summarizes the detail of loans serviced for others for the periods indicated (in thousands):



	Years Ended December 31,
	2012		2011		2010
Residential real estate	$	147,354	$	122,697	$	116,627
SBA loans	3,903		6,578		8,557
Commercial loans	4,140		8,448		13,000
Total loans serviced for others	$	155,397	$	137,723	$	138,184

The gain on the sale of mortgage loans is included in loan related fee income on the Statement of Operations. For the periods indicated, servicing income and costs roughly equaled each other, and as a result, no servicing asset or liability has been recorded in each of the three periods.