Loans (Tables)

6 Months Ended

Jun. 30, 2012

Major classifications of loans are as follows (in thousands):

	June 30,		December 31,
	2012		2011
Commercial	$	441,167	$	450,411
Commercial mortgage *		596,639		609,487
Construction		269,636		246,611
Total commercial loans		1,307,442		1,306,509
Direct lease financing		140,012		129,682
Residential mortgage		97,226		96,110
Consumer loans and others		255,769		209,041
		1,800,449		1,741,342
Unamortized loan costs		3,863		3,486
Total loans, net of deferred loan costs	$	1,804,312	$	1,744,828

Supplemental loan data:
Construction 1-4 family	$	79,546	$	85,189
Commercial construction, acquisition and development		190,090		161,422
	$	269,636	$	246,611

* At June 30, 2012, our owner occupied loans amounted to $141.9 million, or 23. 8% of commercial mortgages as compared to $137.9 million, or 22.6% at December 31, 2011.

Impaired loans

The following table provides information about impaired loans at June 30, 2012 and December 31, 2011 (in thousands):

	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized
June 30, 2012
Without an allowance recorded
Construction	$	2,541	$	5,781	$	-	$	1,123	$	-
Commercial mortgage		3,482		4,027		-		1,550		-
Commercial		1,689		3,727		-		1,284		-
Consumer - home equity		927		927		-		927		-
Residential		-		-		-		421		-
With an allowance recorded
Construction		6,433		7,249		3,303		7,069		-
Commercial mortgage		4,508		5,052		902		5,089		-
Commercial		7,847		8,043		2,739		6,051		-
Consumer - home equity		-		-		-		108		-
Residential		95		95		73		31		-
Total
Construction	$	8,974	$	13,030	$	3,303	$	8,192	$	-
Commercial mortgage	$	7,990	$	9,079	$	903	$	6,639	$	-
Commercial	$	9,536	$	11,770	$	2,739	$	7,335	$	-
Consumer - home equity	$	927	$	927	$	-	$	1,035	$	-
Residential	$	95	$	95	$	73	$	452	$	-

December 31, 2011
Without an allowance recorded
Construction	$	-	$	-	$	-	$	100	$	-
Commercial mortgage		-		-		-		310		-
Commercial		900		2,042		6,831		626		-
Consumer - home equity		927		927		3,765		371		-
Residential		1,264		1,414		149		662		-
With an allowance recorded
Construction		4,949		4,949		2,296		2,123		-
Commercial mortgage		3,672		3,672		712		2,793		-
Commercial		5,550		5,550		2,724		3,075		-
Consumer - home equity		325		325		204		510		-
Residential		-		-		-		5,048		-
Total
Construction	$	4,949	$	4,949	$	2,296	$	2,223	$	-
Commercial mortgage	$	3,672	$	3,672	$	712	$	3,103	$	-
Commercial	$	6,450	$	7,592	$	9,555	$	3,701	$	-
Consumer - home equity	$	1,252	$	1,252	$	3,969	$	881	$	-
Residential	$	1,264	$	1,414	$	149	$	5,710	$	-

Non-accrual loans, loans past due 90 days and other real estate owned and delinquent loans by loan category

The following tables summarize the Company's non-accrual loans, loans past due 90 days and other real estate owned for the periods indicated (the Company had no non-accrual leases at June 30, 2012 or December 31, 2011):

Loans modified and considered troubled debt restructurings

The Company's loans that were modified and considered troubled debt restructurings in the six month period ended June 30, 2012 and year ended December 31, 2011 were already included in non-accrual and non-performing loan totals and are further detailed as follows (dollars in thousands):

	June 30, 2012						December 31, 2011

	Number		Pre- modification recorded investment		Post- modification recorded investment		Number		Pre- modification recorded investment		Post- modification recorded investment
Commercial		1	$	3,155	$	3,155		-	$	-	$	-
Commercial mortgage		3		3,167		3,167		1		759		759
Construction		4		3,701		3,701		-		-		-
Residential mortgage		-		-		-		1		364		364
Total		8	$	10,023	$	10,023		2	$	1,123	$	1,123

Loans modified as troubled debt restructurings

The balances below provide information as to how the loans were modified as troubled debt restructurings loans during the six months ended June 30, 2012 and year ended December 31, 2011. All of the loans were already included in non-accrual and non-performing loans (dollars in thousands).

	June 30, 2012						December 31, 2011
	Adjusted interest rate		Extended maturity		Combined rate and maturity		Adjusted interest rate		Extended maturity		Combined rate and maturity
Commercial	$	-	$	3,155	$	-	$	-	$	-	$	-
Commercial mortgage		736		214		2,217		759		-		-
Construction		-		3,701		-		-		-		-
Residential mortgage		-		-		-		364		-		-
Total	$	736	$	7,070	$	2,217	$	1,123	$	-	$	-

Changes in allowance for loan and lease losses by loan category

A detail of the changes in the allowance for loan and lease losses by loan category is as follows (in thousands):


Six months ended	Commercial			Commercial mortgage			Construction			Residential mortgage			Consumer			Direct lease financing			Unallocated			Total
June 30, 2012
Beginning balance	$	10,214		$	9,274		$	5,352		$	2,090		$	1,346		$	254		$	1,038		$	29,568
Charge-offs		(2,454	)		(1,646	)		(4,837	)		-			(258	)		(87	)		-			(9,282	)
Recoveries		254			1,018			9			85			-			12			-			1,378
Provision		2,109			(1,442	)		8,728			(21	)		552			152			(571	)		9,507
Ending balance	$	10,123		$	7,204		$	9,252		$	2,154		$	1,640		$	331		$	467		$	31,171

Ending balance: Individually evaluated for impairment	$	2,739		$	902		$	3,303		$	73		$	-		$	-		$	-		$	7,017

Ending balance: Collectively evaluated for impairment	$	7,384		$	6,302		$	5,949		$	2,081		$	1,640		$	331		$	467		$	24,154

Loans:
Ending balance	$	441,167		$	596,639		$	269,636		$	97,226		$	255,769		$	140,012		$	3,863		$	1,804,312

Ending balance: Individually evaluated for impairment	$	9,536		$	7,990		$	8,974		$	95		$	927		$	-		$	-		$	27,522

Ending balance: Collectively evaluated for impairment	$	431,631		$	588,649		$	260,662		$	97,131		$	254,842		$	140,012		$	3,863		$	1,776,790

Twelve months ended	Commercial			Commercial mortgage			Construction			Residential mortgage			Consumer			Direct lease financing			Unallocated		Total
December 31, 2011
Beginning balance	$	6,051		$	9,501		$	5,030		$	2,115		$	578		$	164		$	624	$	24,063
Charge-offs		(7,453	)		(1,198	)		(3,254	)		(2,870	)		(1,280	)		(39	)		-		(16,094	)
Recoveries		2			89			4			-			6			-			-		101
Provision		11,614			882			3,572			2,845			2,042			129			414		21,498
Ending balance	$	10,214		$	9,274		$	5,352		$	2,090		$	1,346		$	254		$	1,038	$	29,568

Ending balance: Individually evaluated for impairment	$	2,724		$	712		$	2,296		$	-		$	204		$	-		$	-	$	5,936

Ending balance: Collectively evaluated for impairment	$	7,490		$	8,562		$	3,056		$	2,090		$	1,142		$	254		$	1,038	$	23,632

Loans:
Ending balance	$	450,411		$	609,487		$	246,611		$	96,110		$	209,041		$	129,682		$	3,486	$	1,744,828

Ending balance: Individually evaluated for impairment	$	6,450		$	3,672		$	4,949		$	1,264		$	1,252		$	-		$	-	$	17,587

Ending balance: Collectively evaluated for impairment	$	443,961		$	605,815		$	241,662		$	94,846		$	207,789		$	129,682		$	3,486	$	1,727,241

Six months ended	Commercial			Commercial mortgage			Construction			Residential mortgage			Consumer			Direct lease financing		Unallocated			Total
June 30, 2011
Beginning balance	$	6,051		$	9,501		$	5,030		$	2,115		$	578		$	164	$	624		$	24,063
Charge-offs		(4,702	)		(102	)		(2,496	)		(49	)		(681	)		-		-			(8,030	)
Recoveries		2			13			2			-			-			-		-			17
Provision		8,852			(526	)		983			939			1,488			78		(179	)		11,635
Ending balance	$	10,203		$	8,886		$	3,519		$	3,005		$	1,385		$	242	$	445		$	27,685

Ending balance: Individually evaluated for impairment	$	1,674		$	542		$	394		$	2,163		$	428		$	-	$	-		$	5,201

Ending balance: Collectively evaluated for impairment	$	8,529		$	8,344		$	3,125		$	842		$	957		$	242	$	445		$	22,484

Loans:
Ending balance	$	450,916		$	593,842		$	205,730		$	98,113		$	200,132		$	127,016	$	2,911		$	1,678,660

Ending balance: Individually evaluated for impairment	$	5,337		$	2,782		$	845		$	9,929		$	633		$	-	$	-		$	19,526

Ending balance: Collectively evaluated for impairment	$	445,579		$	591,060		$	204,885		$	88,184		$	199,499		$	127,016	$	2,911		$	1,659,134

Loans by categories

The Company evaluates its loans under an internal loan risk rating system as a means of identifying problem loans. The following table provides information by credit risk rating indicator for each segment of the loan portfolio at the dates indicated (in thousands):


													Commercial						Residential
	Commercial						Construction						mortgage						mortgage
	6/30/2012			12/31/2011			6/30/2012			12/31/2011			6/30/2012			12/31/2011			6/30/2012			12/31/2011
Risk Rating
Pass	$	303,881		$	320,287		$	193,150		$	176,824		$	454,857		$	476,421		$	28,209		$	28,981
Special Mention		2,769			1,049			-			-			24,696			21,615			-			-
Substandard		10,009			7,696			12,055			6,716			10,340			6,867			94			1,264
Doubtful		-			-			-			-			-			-			-			-
Loss		-			-			-			-			-			-			-			-
Unrated *		124,508			121,379			64,431			63,071			106,746			104,584			68,923			65,865
Total	$	441,167		$	450,411		$	269,636		$	246,611		$	596,639		$	609,487		$	97,226		$	96,110
Unrated subject to review		31	%		50	%		84	%		79	%		27	%		25	%		4	%		3	%


							Direct lease
	Consumer						financing						Unamortized costs						Total
	6/30/2012			12/31/2011			6/30/2012			12/31/2011			6/30/2012			12/31/2011			6/30/2012			12/31/2011
Risk Rating
Pass	$	50,270		$	64,236		$	18,259		$	12,025		$	-		$	-		$	1,048,626		$	1,078,774
Special Mention		-			-			-			-			-			-			27,465			22,664
Substandard		2,339			2,718			236			649			-			-			35,073			25,910
Doubtful		-			-			-			-			-			-			-			-
Loss		-			-			-			-			-			-			-			-
Unrated *		203,160			142,087			121,517			117,008			3,863			3,486			693,148			617,480
Total	$	255,769		$	209,041		$	140,012		$	129,682		$	3,863		$	3,486		$	1,804,312		$	1,744,828
Unrated subject to review		4	%		2	%		17	%		25	%		0	%		0	%		22	%		28	%

* Unrated loans consist of performing loans which did not exhibit any negative characteristics which would require the loan to be evaluated, or fell below the dollar threshold requiring review ender the Bank's internal policy and was not one of the loans otherwise selected in ongoing portfolio evaluation. The scope of the Bank's loan review policy encompasses commercial and construction loans and leases which singly, or in aggregate for loans to related borrowers, exceed $3.0 million. The loan portfolio review coverage was approximately 69% at June 30, 2012 and approximately 65% at December 31, 2011. This review is performed by the loan review department, which is independent of the loan origination department and reports directly to the audit committee. Potential problem loans which are identified by either the independent loan review department or line management are reviewed. All classified loans are continuously reviewed quarterly by the independent loan review function of the Bank. Additionally, all loans are subject to ongoing monitoring by portfolio managers and loan officers. Also, many of the Bank's loans are relatively short term, and are subject to reconsideration with a full review in loan committee between one and three years.