Loan and Lease Receivables, Impaired Loans and Leases and Allowance for Loan and Lease Losses

Loan and lease receivables consist of the following:



	June 30, 2012		December 31, 2011
	(In Thousands)
Commercial real estate
Commercial real estate — owner occupied	$	154,191	$	150,528
Commercial real estate — non-owner occupied	298,890		304,597
Construction and land development	43,126		38,124
Multi-family	58,254		43,905
1-4 family	34,453		43,513
Total commercial real estate	588,914		580,667
Commercial and industrial	241,130		237,099
Direct financing leases, net	16,012		17,128
Consumer and other
Home equity and second mortgages	4,839		4,970
Other	12,280		11,682
Total consumer and other loans	17,119		16,652
Total gross loans and leases receivable	863,175		851,546
Less:
Allowance for loan and lease losses	14,818		14,155
Deferred loan fees	646		704
Loans and leases receivable, net	$	847,711	$	836,687

The total principal amount of loans transferred to third parties, which consisted solely of participation interests in originated loans, during the three months ended June 30, 2012 and 2011 was $8.8 million and $8.6 million, respectively. For the six months ended June 30, 2012 and 2011, $34.7 million and $10.1 million of loans were transferred to third parties, respectively. Each of the transfers of these financial assets met the qualifications for sale accounting and therefore $8.8 million and $34.7 million for the three and six months ended June 30, 2012 and $8.6 million and $10.1 million for the three and six months ended June 30, 2011 has been derecognized in the unaudited consolidated financial statements. The Corporation has a continuing involvement in each of the agreements by way of relationship management and servicing the loans; however, there are no further obligations required of the Corporation in the event of default, other than standard representations and warranties related to sold amounts. The loans were transferred at their fair value and no gain or loss was recognized upon the transfer as the participation interest was transferred at or near the date of loan origination. There were no other significant purchases or sales of loan and lease receivables or transfers to loans held for sale during the three and six months ended June 30, 2012 and 2011.

The total amount of outstanding loans transferred to third parties as loan participations at June 30, 2012 and December 31, 2011 was $43.1 million and $49.2 million, respectively, all of which were treated as a sale and derecognized under the applicable accounting guidance in effect at the time of the transfers of the financial assets. The Corporation continues to have involvement with these loans by way of partial ownership, relationship management and all servicing responsibilities. As of June 30, 2012 and December 31, 2011, the total amount of loan participations remaining on the Corporation’s balance sheet was $65.2 million and $74.6 million, respectively. As of June 30, 2012 and December 31, 2011, $3.4 million and $3.4 million of the loans in this participation sold portfolio were considered impaired, respectively. The Corporation recognized a total $2.7 million charge-off associated with specific credits within the retained portion of this portfolio of loans and is measured by the Corporation’s allowance for loan and lease loss measurement process and policies. The Corporation does not share in the participant’s portion of the charge-offs.

The following information illustrates ending balances of the Corporation’s loan and lease portfolio, including impaired loans by class of receivable, and considering certain credit quality indicators as of June 30, 2012 and December 31, 2011:



	Category
As of June 30, 2012	I			II			III			IV			Total
	(Dollars in Thousands)
Commercial real estate:
Commercial real estate — owner occupied	$	126,046		$	14,877		$	12,299		$	969		$	154,191
Commercial real estate — non-owner occupied	223,080			46,316			28,483			1,011			298,890
Construction and land development	26,157			5,570			5,455			5,944			43,126
Multi-family	50,525			6,881			797			51			58,254
1-4 family	18,655			4,629			8,431			2,738			34,453
Total commercial real estate	444,463			78,273			55,465			10,713			588,914

Commercial and industrial	206,766			14,670			16,467			3,227			241,130

Direct financing leases, net	10,559			3,607			1,846			—			16,012

Consumer and other:
Home equity and second mortgages	3,585			173			183			898			4,839
Other	11,131			—			—			1,149			12,280
Total consumer and other	14,716			173			183			2,047			17,119

Total gross loans and leases receivable	$	676,504		$	96,723		$	73,961		$	15,987		$	863,175
Rating as a % of total portfolio	78.37		%	11.21		%	8.57		%	1.85		%	100.00		%



	Category
As of December 31, 2011	I			II			III			IV			Total
	(Dollars in Thousands)
Commercial real estate:
Commercial real estate — owner occupied	$	117,065		$	16,488		$	14,004		$	2,971		$	150,528
Commercial real estate — non-owner occupied	236,868			34,823			30,657			2,249			304,597
Construction and land development	20,660			5,367			4,867			7,230			38,124
Multi-family	34,162			6,930			804			2,009			43,905
1-4 family	23,266			11,637			4,993			3,617			43,513
Total commercial real estate	432,021			75,245			55,325			18,076			580,667

Commercial and industrial	198,018			25,070			12,453			1,558			237,099

Direct financing leases, net	11,398			5,026			686			18			17,128

Consumer and other:
Home equity and second mortgages	3,524			188			256			1,002			4,970
Other	10,459			—			—			1,223			11,682
Total consumer and other	13,983			188			256			2,225			16,652

Total gross loans and leases receivable	$	655,420		$	105,529		$	68,720		$	21,877		$	851,546
Rating as a % of total portfolio	76.97		%	12.39		%	8.07		%	2.57		%	100.00		%

Credit underwriting through a committee process is a key component of the Corporation’s operating philosophy. Business development officers have relatively low individual lending authority limits, therefore requiring that a significant portion of the Corporation’s new credit extensions are approved through various committees depending on the type of loan or lease, asset quality grade of the credit, amount of the credit, and the related complexities of each proposal. In addition, the Corporation makes every effort to ensure that there is appropriate collateral at the time of origination to protect the Corporation’s interest in the related loan or lease.

Each credit is evaluated for proper risk rating upon origination, at the time of each subsequent renewal, upon receipt and evaluation of updated financial information from our borrowers, or as other circumstances dictate. The Corporation uses a nine grade risk rating system to monitor the ongoing credit quality of its loans and leases. The risk rating grades follow a consistent definition, but are then applied to specific loan types based on the nature of the loan. Each risk rating is subjective and depending on the size and nature of the credit, subject to various levels of review and concurrence on the stated risk rating. The Corporation groups loans into four loan and related risk rating categories, which ratings determine the level and nature of review by management.

Category I — Loans and leases in this category are performing in accordance with the terms of the contract and generally exhibit no immediate concerns regarding the security and viability of the underlying collateral, financial stability of the borrower, integrity or strength of the borrower’s management team or the industry in which the borrower operates. Loans and leases in this category are not subject to additional monitoring procedures above and beyond what is required at the origination or renewal of the loan or lease. The Corporation monitors Category I loans and leases through payment performance, continued maintenance of our personal relationships with such borrowers and, continued review of such borrowers' compliance with the terms of the agreement.

Category II — Loans and leases in this category are beginning to show signs of deterioration in one or more of the Corporation’s core underwriting criteria such as financial stability, management strength, industry trends and collateral values. Management will place credits in this category to allow for proactive monitoring and resolution with the borrower to possibly mitigate the area of concern and prevent further deterioration or risk of loss to the Corporation. Category II loans are monitored frequently by the assigned business development officer and by a subcommittee of the Banks’ loan committees and are considered performing.

Category III — Loans and leases in this category are identified by the Corporation’s business development officers and senior management as warranting special attention. However, the balance in this category is not intended to represent the amount of adversely classified assets held by the Banks. Category III loans and leases generally exhibit undesirable characteristics such as evidence of adverse financial trends and conditions, managerial problems, deteriorating economic conditions within the related industry, or evidence of adverse public filings and may exhibit collateral shortfall positions. Management continues to believe that it will collect all required principal and interest in accordance with the original terms of the contract, and therefore Category III loans are considered performing and no specific reserves are established for this category. This portfolio of loans is monitored on a monthly basis by management, loan committees of the Banks, and the Banks’ Boards of Directors.

Category IV — Loans and leases in this category are considered to be impaired. Impaired loans and leases have been placed on non-accrual as management has determined that it is unlikely that the Banks will receive the required principal and interest in accordance with the contractual terms of the agreement. Impaired loans are individually evaluated to assess the need for the establishment of specific reserves or charge-offs. When analyzing the adequacy of collateral, the Corporation obtains external appraisals at least annually for impaired loans and leases. External appraisals are obtained from the Corporation’s approved appraiser listing and are independently reviewed to monitor the quality of such appraisals. To the extent a collateral shortfall position is present, a specific reserve or charge-off will be recorded to reflect the magnitude of the impairment. Loans and leases in this category are monitored on a monthly basis by management, loan committees of the Banks, and the Banks’ Boards of Directors.

Utilizing regulatory terminology, the Corporation identified $30.2 million and $42.6 million of loans as Substandard as of June 30, 2012 and December 31, 2011. No loans and leases were identified as Special Mention, Doubtful, or Loss. The population of Substandard loans are a subset of Category III and Category IV loans.

The delinquency aging of the loan and lease portfolio by class of receivable as of June 30, 2012 and December 31, 2011 were as follows:



As of June 30, 2012	30-59 days past due			60-89 days past due			Greater than 90 days past due			Total past due			Current			Total loans
	(Dollars in Thousands)
Accruing loans and leases
Commercial real estate:
Owner occupied	$	507		$	—		$	—		$	507		$	152,715		$	153,222
Non-owner occupied	—			—			—			—			297,879			297,879
Construction and land development	—			—			—			—			37,718			37,718
Multi-family	—			—			—			—			58,203			58,203
1-4 family	314			—			—			314			31,401			31,715
Commercial & industrial	268			—			—			268			237,635			237,903
Direct financing leases, net	—			—			—			—			16,012			16,012
Consumer and other:
Home equity and second mortgages	—			—			—			—			3,941			3,941
Other	—			—			—			—			11,131			11,131
Total	1,089			—			—			1,089			846,635			847,724
Non-accruing loans and leases
Commercial real estate:
Owner occupied	$	102		$	—		$	—		$	102		$	867		$	969
Non-owner occupied	—			—			585			585			426			1,011
Construction and land development	110			106			550			766			4,642			5,408
Multi-family	—			—			—			—			51			51
1-4 family	—			247			152			399			2,339			2,738
Commercial & industrial	—			—			269			269			2,958			3,227
Direct financing leases, net	—			—			—			—			—			—
Consumer and other:
Home equity and second mortgages	—			—			200			200			698			898
Other	—			—			1,147			1,147			2			1,149
Total	212			353			2,903			3,468			11,983			15,451
Total loans and leases
Commercial real estate:
Owner occupied	$	609		$	—		$	—		$	609		$	153,582		$	154,191
Non-owner occupied	—			—			585			585			298,305			298,890
Construction and land development	110			106			550			766			42,360			43,126
Multi-family	—			—			—			—			58,254			58,254
1-4 family	314			247			152			713			33,740			34,453
Commercial & industrial	268			—			269			537			240,593			241,130
Direct financing leases, net	—			—			—			—			16,012			16,012
Consumer and other:
Home equity and second mortgages	—			—			200			200			4,639			4,839
Other	—			—			1,147			1,147			11,133			12,280
Total	$	1,301		$	353		$	2,903		$	4,557		$	858,618		$	863,175
Percent of portfolio	0.15		%	0.04		%	0.34		%	0.53		%	99.47		%	100.00		%



As of December 31, 2011	30-59 days past due			60-89 days past due			Greater than 90 days past due			Total past due			Current			Total loans
	(Dollars in Thousands)
Accruing loans and leases
Commercial real estate:
Owner occupied	$	106		$	—		$	—		$	106		$	147,450		$	147,556
Non-owner occupied	—			131			—			131			302,217			302,348
Construction and land development	3,942			—			—			3,942			26,953			30,895
Multi-family	—			—			—			—			41,896			41,896
1-4 family	—			—			—			—			40,007			40,007
Commercial & industrial	25			—			—			25			235,516			235,541
Direct financing leases, net	—			—			—			—			17,110			17,110
Consumer and other:
Home equity and second mortgages	—			—			—			—			3,968			3,968
Other	—			—			—			—			10,459			10,459
Total	4,073			131			—			4,204			825,576			829,780
Non-accruing loans and leases
Commercial real estate:
Owner occupied	$	—		$	—		$	2,011		$	2,011		$	961		$	2,972
Non-owner occupied	—			155			1,625			1,780			469			2,249
Construction and land development	114			515			704			1,333			5,896			7,229
Multi-family	—			—			2,009			2,009			—			2,009
1-4 family	404			224			495			1,123			2,383			3,506
Commercial & industrial	21			—			298			319			1,239			1,558
Direct financing leases, net	—			—			—			—			18			18
Consumer and other:
Home equity and second mortgages	—			40			315			355			647			1,002
Other	—			—			1,222			1,222			1			1,223
Total	539			934			8,679			10,152			11,614			21,766
Total loans and leases
Commercial real estate:
Owner occupied	$	106		$	—		$	2,011		$	2,117		$	148,411		$	150,528
Non-owner occupied	—			286			1,625			1,911			302,686			304,597
Construction and land development	4,056			515			704			5,275			32,849			38,124
Multi-family	—			—			2,009			2,009			41,896			43,905
1-4 family	404			224			495			1,123			42,390			43,513
Commercial & industrial	46			—			298			344			236,755			237,099
Direct financing leases, net	—			—			—			—			17,128			17,128
Consumer and other:
Home equity and second mortgages	—			40			315			355			4,615			4,970
Other	—			—			1,222			1,222			10,460			11,682
Total	$	4,612		$	1,065		$	8,679		$	14,356		$	837,190		$	851,546
Percent of portfolio	0.54		%	0.12		%	1.02		%	1.68		%	98.32		%	100.00		%

The Corporation’s non-accrual loans and leases consisted of the following at June 30, 2012 and December 31, 2011, respectively.



	June 30, 2012		December 31, 2011
	(Dollars in Thousands)
Non-accrual loans and leases
Commercial real estate:
Commercial real estate — owner occupied	$	969	$	2,972
Commercial real estate — non-owner occupied	1,011		2,249
Construction and land development	5,408		7,229
Multi-family	51		2,009
1-4 family	2,738		3,506
Total non-accrual commercial real estate	10,177		17,965
Commercial and industrial	3,227		1,558
Direct financing leases, net	—		18
Consumer and other:
Home equity and second mortgage	898		1,002
Other	1,149		1,223
Total non-accrual consumer and other loans	2,047		2,225
Total non-accrual loans and leases	15,451		21,766
Foreclosed properties, net	1,937		2,236
Total non-performing assets	$	17,388	$	24,002
Performing troubled debt restructurings	$	536	$	111



	June 30, 2012		December 31, 2011
Total non-accrual loans and leases to gross loans and leases	1.79	%	2.56	%
Total non-performing assets to total assets	1.50		2.04
Allowance for loan and lease losses to gross loans and leases	1.72		1.66
Allowance for loan and lease losses to non-accrual loans and leases	95.90		65.03

As of June 30, 2012 and December 31, 2011, $11.4 million and $13.3 million of the impaired loans were considered troubled debt restructurings, respectively. As of June 30, 2012, there were no unfunded commitments associated with troubled debt restructured loans and leases.



	As of June 30, 2012					As of December 31, 2011
	Number of Loans	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Loans	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
	(Dollars in Thousands)
Troubled debt restructurings:
Commercial real estate
Commercial real estate — owner occupied	4	$	338	$	289	5	$	380	$	352
Commercial real estate — non-owner occupied	6	972		844		6	971		902
Construction and land development	3	8,044		5,057		4	8,457		5,692
Multi-family	1	184		51		—	—		—
1-4 family	14	2,951		2,664		15	3,152		3,031
Commercial and industrial	7	2,250		1,132		9	2,394		1,393
Direct financing leases, net	—	—		—		1	32		18
Consumer and other:
Home equity and second mortgage	8	865		785		8	865		813
Other	1	2,076		1,139		1	2,076		1,222
Total	44	$	17,680	$	11,961	49	$	18,327	$	13,423

For the six months ended June 30, 2012 and the year ended December 31, 2011, the primary reasons for troubled debt restructuring classification were due to the Banks’ decisions to provide below market interest rates to assist the borrowers in managing their cash flow as well as extensions of credit either through additional dollars or an extension of time when additional collateral or other evidence of repayment was not available. All loans and leases modified as a troubled debt restructuring are evaluated for impairment. The nature and extent of the impairment of restructured loans, including those which have experienced a default, is considered in the determination of an appropriate level of the allowance for loan and lease losses.

As of June 30, 2012 and December 31, 2011, our troubled debt restructurings grouped by type of concession were as follows:



	As of June 30, 2012			As of December 31, 2011
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(Dollars in Thousands)
Commercial real estate
Extension of term	2	$	129	2	$	127
Combination of extension and interest rate concession	26	8,776		28	9,850
Commercial and industrial
Extension of term	4	353		5	406
Combination of extension and interest rate concession	3	779		4	987
Consumer and other
Extension of term	2	1,226		5	1,603
Combination of extension and interest rate concession	7	698		4	432
Direct financing leases, net
Extension of term	—	—		1	18
Total	44	$	11,961	49	$	13,423

The following table provides the number of loans and leases modified in a troubled debt restructuring during the previous 12 months which subsequently defaulted during the six months ended June 30, 2012, as well as the recorded investment in these restructured loans as of June 30, 2012.



	Six months ended June 30, 2012
	Number of Loans	Recorded Investment
	(Dollars in Thousands)
Commercial real estate
Construction and land development	1	$	110
Total	1	$	110

The following represents additional information regarding the Corporation’s impaired loans and leases by class:



	Impaired Loans and Leases
	As of and for the Six Months Ended June 30, 2012
	Recorded investment		Unpaid principal balance		Impairment reserve		Average recorded investment⁽¹⁾		Foregone interest income		Interest income recognized		Net foregone interest income
	(In Thousands)
With no impairment reserve recorded:
Commercial real estate:
Owner occupied	$	573	$	573	$	—	$	2,198	$	88	$	—	$	88
Non-owner occupied	856		2,688		—		1,304		124		154		(30		)
Construction and land development	5,408		8,985		—		5,922		130		24		106
Multi-family	51		418		—		582		46		60		(14		)
1-4 family	1,908		1,990		—		2,203		80		—		80
Commercial and industrial	901		1,105		—		1,372		166		25		141
Direct financing leases, net	—		—		—		8		—		1		(1		)
Consumer and other:
Home equity loans and second mortgages	675		710		—		738		27		1		26
Other	1,140		1,627		—		1,169		57		1		56
Total	11,512		18,096		—		15,496		718		266		452
With impairment reserve recorded:
Commercial real estate:
Owner occupied	$	396	$	396	$	13	$	404	$	17	$	—	$	17
Non-owner occupied	155		155		155		155		2		—		2
Construction and land development	536		536		200		546		14		—		14
Multi-family	—		—		—		—		—		—		—
1-4 family	830		830		296		840		23		—		23
Commercial and industrial	2,326		3,826		459		2,101		14		—		14
Direct financing leases, net	—		—		—		—		—		—		—
Consumer and other:
Home equity loans and second mortgages	223		223		112		232		9		—		9
Other	9		9		9		9		—		—		—
Total	4,475		5,975		1,244		4,287		79		—		79
Total:
Commercial real estate:
Owner occupied	$	969	$	969	$	13	$	2,602	$	105	$	—	$	105
Non-owner occupied	1,011		2,843		155		1,459		126		154		(28		)
Construction and land development	5,944		9,521		200		6,468		144		24		120
Multi-family	51		418		—		582		46		60		(14		)
1-4 family	2,738		2,820		296		3,043		103		—		103
Commercial and industrial	3,227		4,931		459		3,473		180		25		155
Direct financing leases, net	—		—		—		8		—		1		(1		)
Consumer and other:
Home equity loans and second mortgages	898		933		112		970		36		1		35
Other	1,149		1,636		9		1,178		57		1		56
Grand total	$	15,987	$	24,071	$	1,244	$	19,783	$	797	$	266	$	531


(1)	Average recorded investment is calculated primarily using daily average balances.



	Impaired Loans and Leases
	As of and for the Year Ended December 31, 2011
	Recorded investment		Unpaid principal balance		Impairment reserve		Average recorded investment(1)		Foregone interest income		Interest income recognized		Net Foregone Interest Income
	(In Thousands)
With no impairment reserve recorded:
Commercial real estate:
Owner occupied	$	2,455	$	3,669	$	—	$	5,177	$	450	$	200	$	250
Non-owner occupied	2,249		4,081		—		5,261		424		—		424
Construction and land development	6,383		9,927		—		7,974		350		48		302
Multi-family	2,009		2,246		—		3,075		362		—		362
1-4 family	2,628		3,016		—		3,160		277		108		169
Commercial and industrial	1,139		1,320		—		3,820		384		424		(40		)
Direct financing leases, net	—		—		—		—		—		—		—
Consumer and other:
Home equity loans and second mortgages	803		827		—		884		62		1		61
Other	1,222		1,682		—		1,691		138		6		132
Total	18,888		26,768		—		31,042		2,447		787		1,660
With impairment reserve recorded:
Commercial real estate:
Owner occupied	$	517	$	517	$	13	$	358	$	81	$	—	$	81
Non-owner occupied	—		—		—		—		—		—		—
Construction and land development	846		846		130		483		48		—		48
Multi-family	—		—		34		287		—		—		—
1-4 family	989		989		337		1,017		61		—		61
Commercial and industrial	419		419		276		384		24		—		24
Direct financing leases, net	18		18		18		13		1		—		1
Consumer and other:
Home equity loans and second mortgages	199		199		79		208		20		—		20
Other	1		1		1		1		—		—		—
Total	2,989		2,989		888		2,751		235		—		235
Total:
Commercial real estate:
Owner occupied	$	2,972	$	4,186	$	13	$	5,535	$	531	$	200	$	331
Non-owner occupied	2,249		4,081		—		5,261		424		—		424
Construction and land development	7,229		10,773		130		8,457		398		48		350
Multi-family	2,009		2,246		34		3,362		362		—		362
1-4 family	3,617		4,005		337		4,177		338		108		230
Commercial and industrial	1,558		1,739		276		4,204		408		424		(16		)
Direct financing leases, net	18		18		18		13		1		—		1
Consumer and other:
Home equity loans and second mortgages	1,002		1,026		79		1,092		82		1		81
Other	1,223		1,683		1		1,692		138		6		132
Grand total	$	21,877	$	29,757	$	888	$	33,793	$	2,682	$	787	$	1,895


(1)	Average recorded investment is calculated primarily using daily average balances.

The difference between the loans and leases recorded investment and the unpaid principal balance of $8.1 million and $7.9 million as of June 30, 2012 and December 31, 2011 represents partial charge-offs resulting from confirmed losses due to the value of the collateral securing the loans and leases being below the carrying values of the loans and leases. Impaired loans and leases also included $536,000 and $111,000 of loans that were performing troubled debt restructurings, and thus, while not on non-accrual, were reported as impaired, due to the concession in terms. When a loan is placed on non-accrual, interest accruals are discontinued and previously accrued but uncollected interest is deducted from interest income. Cash payments collected on non-accrual loans are first applied to principal. Foregone interest represents the interest that was contractually due on the note. To the extent the amount of principal on a non-accrual note is fully collected and additional cash is received, the Corporation will recognize interest income.

To determine the level and composition of the allowance for loan and lease losses, the Corporation breaks out the portfolio by segments and risk ratings. First, the Corporation evaluates loans and leases for potential impairment classification. If a loan or lease is determined to be impaired, then the Corporation analyzes the impaired loans and leases on an individual basis to determine a specific reserve based upon the estimated value of the underlying collateral for collateral-dependent loans, or alternatively, the present value of expected cash flows. The Corporation applies historical trends from the previously identified factors to each category of loans and leases that has not been individually evaluated for the purpose of establishing the general portion of the allowance.

A summary of the activity in the allowance for loan and lease losses by portfolio segment is as follows:



	As of and for the Six Months Ended June 30, 2012
	Commercial real estate			Commercial and industrial			Consumer and other			Direct financing leases, net			Total
	(Dollars in Thousands)
Allowance for credit losses:
Beginning balance	$	9,554		$	3,977		$	384		$	240		$	14,155
Charge-offs	(447		)	(1,529		)	(94		)	—			(2,070		)
Recoveries	106			64			14			—			184
Provision	784			1,675			121			(31		)	2,549
Ending balance	$	9,997		$	4,187		$	425		$	209		$	14,818
Ending balance: individually evaluated for impairment	$	677		$	459		$	108		$	—		$	1,244
Ending balance: collectively evaluated for impairment	$	9,320		$	3,728		$	317		$	209		$	13,574
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—
Loans and lease receivables:
Ending balance, gross	$	588,914		$	241,130		$	17,119		$	16,012		$	863,175
Ending balance: individually evaluated for impairment	$	10,713		$	3,227		$	2,047		$	—		$	15,987
Ending balance: collectively evaluated for impairment	$	578,201		$	237,903		$	15,072		$	16,012		$	847,188
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—
Allowance as % of gross loans	1.70		%	1.74		%	2.48		%	1.31		%	1.72		%



	As of and for the Six Months Ended June 30, 2011
	Commercial real estate			Commercial and industrial			Consumer and other			Direct financing leases, net			Total
	(Dollars in Thousands)
Allowance for credit losses:
Beginning balance	$	11,267		$	4,277		$	482		$	245		$	16,271
Charge-offs	(3,538		)	(198		)	(148		)	—			(3,884		)
Recoveries	216			376			61			19			672
Provision	3,111			(274		)	63			(22		)	2,878
Ending balance	$	11,056		$	4,181		$	458		$	242		$	15,937
Ending balance: individually evaluated for impairment	$	2,099		$	757		$	121		$	32		$	3,009
Ending balance: collectively evaluated for impairment	$	8,957		$	3,424		$	337		$	210		$	12,928
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—
Loans and lease receivables:
Ending balance, gross	$	614,670		$	212,326		$	18,425		$	15,958		$	861,379
Ending balance: individually evaluated for impairment	$	27,310		$	4,483		$	2,799		$	32		$	34,624
Ending balance: collectively evaluated for impairment	$	587,360		$	207,843		$	15,626		$	15,926		$	826,755
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—
Allowance as % of gross loans	1.80		%	1.97		%	2.49		%	1.52		%	1.85		%