Loans and Allowance for Loan Losses

The Bank's loan portfolio includes commercial, consumer, agricultural and residential loans originated primarily in its markets in central and north Mississippi, southwest Tennessee, central Alabama and the Florida panhandle. The following is a summary of the Bank's loans held for investment, net of unearned income of $530 thousand at March 31, 2013 and $736 thousand at December 31, 2012:



(Dollars in thousands)	March 31, 2013		December 31, 2012
Construction and land development loans	$	62,116	$	58,745
Other commercial real estate loans	495,337		484,114
Asset-based loans	35,527		36,679
Other commercial loans	114,598		116,871
Home equity loans	39,047		37,736
Other 1-4 family residential loans	203,260		200,992
Consumer loans	37,772		40,336
Total loans	$	987,657	$	975,473

The Bank uses loans as collateral for borrowings at the Federal Reserve Bank and a Federal Home Loan Bank. Approximately $14.635 million and $16.703 million of commercial and consumer loans were pledged to a line of credit with the Federal Reserve Bank at March 31, 2013 and December 31, 2012 respectively. Approximately $103.412 million and $145.064 million of individual real estate-secured loans were pledged to the Federal Home Loan Bank at March 31, 2013 and December 31, 2012, respectively.

During the first quarter of 2013 the Company purchased $561 thousand in commercial real estate participations. No loan purchases were made during the first quarter of 2012.

During the first quarter of 2013 the Company transferred $1.833 million of mortgage loans from held-for-sale status into the portfolio of loans held for investment. During the first quarter of 2012 the Company transferred $1.997 million of mortgage loans from held-for-sale status into the portfolio of loans held for investment.

Note 4: (Continued)

The following table presents a summary of the past due status of all loans, including nonaccrual loans, by type at March 31, 2013:



(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
Construction and land development loans	$	112	$	14	$	694	$	820	$	61,296	$	62,116	$	—
Other commercial real estate loans	865		454		1,464		2,783		492,554		495,337		19
Asset based loans	—		—		81		81		35,446		35,527		—
Other commercial loans	503		37		277		817		113,781		114,598		52
Home equity loans	458		—		—		458		38,589		39,047		—
Other 1-4 family residential loans	2,618		1,657		620		4,895		198,365		203,260		174
Consumer loans	206		44		52		302		37,470		37,772		23
Total	$	4,762	$	2,206	$	3,188	$	10,156	$	977,501	$	987,657	$	268

The following table presents a summary of the past due status of all loans, including nonaccrual loans, by type at December 31, 2012:



(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
Construction and land development loans	$	369	$	26	$	817	$	1,212	$	57,533	$	58,745	$	—
Other commercial real estate loans	1,255		294		3,647		5,196		478,918		484,114		66
Asset based loans	—		—		81		81		36,598		36,679		—
Other commercial loans	366		50		408		824		116,047		116,871		64
Home equity loans	49		—		31		80		37,656		37,736		31
Other 1-4 family residential loans	1,329		584		791		2,704		198,288		200,992		137
Consumer loans	217		60		23		300		40,036		40,336		23
Total	$	3,585	$	1,014	$	5,798	$	10,397	$	965,076	$	975,473	$	321

Loans are placed into nonaccrual status when, in management's opinion, the borrowers may be unable to meet their payment obligations, which typically occurs when principal or interest payments are more than 90 days past due. The following table presents a summary of the nonaccrual status of loans by type at March 31, 2013 and December 31, 2012 and other nonperforming assets:



(Dollars in thousands)	March 31, 2013		December 31, 2012
Construction and land development loans	$	891	$	817
Other commercial real estate loans	2,895		4,244
Asset based loans	81		81
Other commercial loans	612		694
Home equity loans	70		72
Other 1-4 family residential loans	2,684		1,524
Consumer loans	44		12
Total nonaccrual loans	$	7,277	$	7,444
Other real estate owned	24,820		25,970
Total nonperforming credit-related assets	$	32,097	$	33,414

Note 4: (Continued)

The Company applies internal risk ratings to all loans. The risk ratings range from 10, which is the highest quality rating, to 70, which indicates an impending charge-off. The following definitions apply to the internal risk ratings:

Risk rating 10 – Excellent:

Commercial – Credits in this category are virtually risk-free and are well-collateralized by cash-equivalent instruments. The repayment program is well-defined and achievable. Repayment sources are numerous. No material documentation deficiencies or exceptions exist.

Consumer – This grade is reserved for loans secured by cash collateral on deposit at the Bank with no risk of principal deterioration.

Risk rating 20 – Strong:

Commercial and Consumer – This grade is reserved for loans secured by readily marketable collateral, or loans within guidelines to borrowers with liquid financial statements. A liquid financial statement is a financial statement with substantial liquid assets relative to debts. These loans have excellent sources of repayment, with no significant identifiable risk of collection, and conform in all respects to Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind).

Risk rating 30 – Good:

Commercial – This grade is reserved for the Bank’s top quality loans. These loans have excellent sources of repayment, with no significant identifiable risk of collection. Generally, loans assigned this risk grade will demonstrate the following characteristics: (1) conformity in all respects with Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind), (2) documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources, and (3) adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.

Consumer – This grade is reserved for the Bank’s top quality loans. These loans have excellent sources of repayment, with no significant identifiable risk of collection, and they: (1) conform to Bank policy, (2) conform to underwriting standards and (3) conform to product guidelines.

Risk rating 31 – Moderate:

Commercial – This grade is given to acceptable loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Loans assigned this risk grade will demonstrate the following characteristics: (1) general conformity to the Bank’s policy requirements, product guidelines and underwriting standards, with limited exceptions – any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors, (2) documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources and (3) adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.

Consumer – This grade is given to acceptable loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Consumer loans exhibiting this grade may have up to two mitigated guideline tolerances or exceptions.

Risk rating 32 – Fair:

Commercial – This grade is given to acceptable loans that show signs of weakness in either adequate sources of repayment or collateral, but have demonstrated mitigating factors that minimize the risk of delinquency or loss. Loans assigned this grade may demonstrate some or all of the following characteristics: (1) additional exceptions to the Bank’s policy requirements, product guidelines or underwriting standards that present a higher degree of risk to the Bank – although the combination and/or severity of identified exceptions is greater, all exceptions have been properly mitigated by other factors, (2) unproved, insufficient or marginal primary sources of repayment that appear sufficient to service the debt at this time – repayment weaknesses may be due to minor operational issues, financial trends, or reliance on projected (not historic) performance and (3) marginal or unproven secondary sources to liquidate the debt, including combinations of liquidation of collateral and liquidation value to the net worth of the borrower or guarantor.

Consumer – This grade is given to acceptable loans that show signs of weakness in either adequate sources of repayment or collateral, but have demonstrated mitigating factors that minimize the risk of delinquency or loss. Consumer loans exhibiting this grade generally have three or more mitigated guideline tolerances or exceptions.

Note 4: (Continued)

Risk rating 40 – Special Mention:

Commercial – Special Mention loans include the following characteristics: (1) loans with underwriting guideline tolerances and/or exceptions and with no mitigating factors, (2) extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank’s position at some future date – potential weaknesses are the result of deviations from prudent lending practices, and (3) loans where adverse economic conditions that develop subsequent to the loan origination that don’t jeopardize liquidation of the debt but do substantially increase the level of risk may also warrant this rating.

Consumer - Special Mention loans include the following characteristics: (1) loans with guideline tolerances or exceptions of any kind that have not been mitigated by other economic or credit factors, (2) extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank’s position at some future date – potential weaknesses are the result of deviations from prudent lending practices, and (3) loans where adverse economic conditions that develop subsequent to the loan origination that do not jeopardize liquidation of the debt but do substantially increase the level of risk may also warrant this rating.

Risk rating 50 – Substandard:

Commercial and Consumer – A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans consistently not meeting the repayment schedule should be downgraded to substandard. Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action. The weaknesses may include, but are not limited to: (1) high debt to worth ratios, (2) declining or negative earnings trends, (3) declining or inadequate liquidity, (4) improper loan structure, (5) questionable repayment sources, (6) lack of well-defined secondary repayment source and (7) unfavorable competitive comparisons. Such loans are no longer considered to be adequately protected due to the borrower’s declining net worth, lack of earnings capacity, declining collateral margins and/or unperfected collateral positions. A possibility of loss of a portion of the loan balance cannot be ruled out. The repayment ability of the borrower is marginal or weak and the loan may have exhibited excessive overdue status or extensions and/or renewals.

Risk rating 60 – Doubtful:

Commercial and Consumer – Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt. Among these events are: (1) injection of capital, (2) alternative financing and (3) liquidation of assets or the pledging of additional collateral. The ability of the borrower to service the debt is extremely weak, overdue status is constant, the debt has been considered for non-accrual status, and the repayment schedule is questionable. Doubtful is a temporary grade where a loss is expected but is presently not quantified with any degree of accuracy. Once the loss position is determined, the amount is charged off.

Risk rating 70 – Loss:

Commercial and Consumer – Loans classified Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future. Probable Loss portions of Doubtful assets should be charged against the Reserve for Loan Losses. Loans may reside in this classification for administrative purposes for a period not to exceed the earlier of thirty (30) days or calendar quarter-end.

Note 4: (Continued)

The following table presents a summary of loans by credit risk rating at March 31, 2013.



(Dollars in thousands)
	Construction		Other Commercial Real Estate		Asset-Based		Other Commercial
10 and 20	$	—	$	—	$	—	$	10,972
30-32	44,247		409,985		25,155		95,857
40	7,754		59,427		10,283		6,578
50	9,515		25,925		89		1,121
60	600		—		—		70
Total	$	62,116	$	495,337	$	35,527	$	114,598



(Dollars in thousands)
	Home Equity		Other 1-4 Family		Consumer		Total
10 and 20	$	—	$	51	$	12,544	$	23,567
30-32	37,195		186,763		24,488		823,690
40	807		9,120		538		94,507
50	1,045		7,238		200		45,133
60	—		88		2		760
Total	$	39,047	$	203,260	$	37,772	$	987,657

The following table presents a summary of loans by credit risk rating at December 31, 2012.



(Dollars in thousands)
	Construction		Other Commercial Real Estate		Asset-Based		Other Commercial
10 and 20	$	—	$	—	$	—	$	10,329
30-32	41,560		394,904		25,830		101,937
40	6,847		62,387		10,572		3,253
50	9,738		26,823		277		1,280
60	600		—		—		72
Total	$	58,745	$	484,114	$	36,679	$	116,871



(Dollars in thousands)
	Home Equity		Other 1-4 Family		Consumer		Total
10 and 20	$	—	$	58	$	13,161	$	23,548
30-32	35,848		184,703		26,439		811,221
40	733		9,529		602		93,923
50	1,155		6,613		132		46,018
60	—		89		2		763
Total	$	37,736	$	200,992	$	40,336	$	975,473

Note 4: (Continued)

Loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of the collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

The Company uses a five year average in calculating the historical loss rates that are applied to various risk pools of loans in determining the allowance for loan losses for loans not individually tested for impairment. This calculation is a straight historical average which naturally includes recent high-loss years. Management believes that the five year historical loss calculation will better reflect the risks inherent in the recent and current credit environment and that it is more appropriate than an even shorter historical period (e.g., three years) because a shorter period would too heavily weight improved periods and too quickly remove recent periods that included larger losses caused by factors that could still reasonably exist latent in the makeup of the loan class.

The Company uses environmental factors to adjust loss rates to reflect economic conditions and other circumstances that imply risk of loss in the current environment that is not necessarily reflected in the historical loss rates. At December 31, 2012 the Company adjusted the five year loss rates by an economic environmental factor based on recessionary conditions and an illiquid market for undeveloped real estate collateral. The loss rate applied to commercial real estate loans was adjusted upward by 15 basis points. The loss rate applied to commercial, agricultural and municipal loans was adjusted upward by 35 basis points given their dependency on cash flows which are at risk absent a growing economy.

Note 4: (Continued)

The following table summarizes loans that were individually reviewed for impairment allowances at March 31, 2013:



(Dollars in thousands)
	Recorded Balance		Unpaid Principal Balance		Specific Allowance
Loans without a specific valuation allowance:
Construction and land development loans	$	6,215	$	8,569	$	—
Other commercial real estate loans	19,213		19,656		—
Asset based loans	—		—		—
Other commercial loans	744		744		—
Home equity loans	1,045		1,045		—
Other 1-4 family residential loans	5,596		5,673		—
Consumer loans	150		153		—
Loans with a specific valuation allowance:
Construction and land development loans	$	3,900	$	3,900	$	2,217
Other commercial real estate loans	12,502		13,913		2,351
Asset based loans	—		—		—
Other commercial loans	447		447		299
Home equity loans	—		—		—
Other 1-4 family residential loans	1,730		1,730		359
Consumer loans	52		52		52
Total:
Construction and land development loans	$	10,115	$	12,469	$	2,217
Other commercial real estate loans	31,715		33,569		2,351
Asset based loans	—		—		—
Other commercial loans	1,191		1,191		299
Home equity loans	1,045		1,045		—
Other 1-4 family residential loans	7,326		7,403		359
Consumer loans	202		205		52

Note 4: (Continued)

The following table summarizes the average recorded investment in impaired loans and the amount of interest income recognized for the first quarter of 2013:



(Dollars in thousands)	Average Investment In Impaired Loans		Interest Income Recognized
	Quarter-to-Date		Quarter-to-Date
Loans without a specific valuation allowance:
Construction and land development loans	$	6,343	$	68
Other commercial real estate loans	24,018		257
Asset based loans	—		—
Other commercial loans	942		12
Home equity loans	1,102		13
Other 1-4 family residential loans	6,226		57
Consumer loans	124		—
Loans with a specific valuation allowance:
Construction and land development loans	$	3,893	$	41
Other commercial real estate loans	12,346		147
Asset based loans	—		—
Other commercial loans	331		4
Home equity loans	—		—
Other 1-4 family residential loans	1,689		16
Consumer loans	42		1
Total:
Construction and land development loans	$	10,236	$	109
Other commercial real estate loans	36,364		404
Asset based loans	—		—
Other commercial loans	1,273		16
Home equity loans	1,102		13
Other 1-4 family residential loans	7,915		73
Consumer loans	166		1

Note 4: (Continued)

The following table summarizes loans that were individually reviewed for impairment allowances at March 31, 2012:



(Dollars in thousands)
	Recorded Balance		Unpaid Principal Balance		Specific Allowance
Loans without a specific valuation allowance:
Construction and land development loans	$	12,869	$	17,072	$	—
Other commercial real estate loans	33,625		36,738		—
Asset based loans	—		—		—
Other commercial loans	579		606		—
Home equity loans	322		322		—
Other 1-4 family residential loans	4,455		4,527		—
Consumer loans	119		130		—
Loans with a specific valuation allowance:
Construction and land development loans	$	4,632	$	7,307	$	1,689
Other commercial real estate loans	9,109		10,137		1,340
Asset based loans	—		—		—
Other commercial loans	814		814		361
Home equity loans	325		325		286
Other 1-4 family residential loans	2,353		2,353		420
Consumer loans	39		39		39
Total:
Construction and land development loans	$	17,501	$	24,379	$	1,689
Other commercial real estate loans	42,734		46,875		1,340
Asset based loans	—		—		—
Other commercial loans	1,393		1,420		361
Home equity loans	647		647		286
Other 1-4 family residential loans	6,808		6,880		420
Consumer loans	158		169		39

Note 4: (Continued)

The following table summarizes the average recorded investment in impaired loans and the amount of interest income recognized for the first quarter of 2012:



(Dollars in thousands)	Average Investment In Impaired Loans		Interest Income Recognized
	Quarter-to-Date		Quarter-to-Date
Loans without a specific valuation allowance:
Construction and land development loans	$	13,900	$	150
Other commercial real estate loans	34,382		408
Asset based loans	—		—
Other commercial loans	673		9
Home equity loans	325		1
Other 1-4 family residential loans	5,280		53
Consumer loans	130		2
Loans with a specific valuation allowance:
Construction and land development loans	$	4,634	$	32
Other commercial real estate loans	9,614		61
Asset based loans	—		—
Other commercial loans	822		6
Home equity loans	327		2
Other 1-4 family residential loans	2,356		31
Consumer loans	47		1
Total:
Construction and land development loans	$	18,534	$	182
Other commercial real estate loans	43,996		469
Asset based loans	—		—
Other commercial loans	1,495		15
Home equity loans	652		3
Other 1-4 family residential loans	7,636		84
Consumer loans	177		3

Note 4: (Continued)

The following table summarizes loans that were individually reviewed for impairment allowances at December 31, 2012:



(Dollars in thousands)
	Recorded Balance		Unpaid Principal Balance		Specific Allowance
Loans without a specific valuation allowance:
Construction and land development loans	$	6,903	$	9,257	$	—
Other commercial real estate loans	27,156		27,353		—
Asset based loans	—		—		—
Other commercial loans	1,093		1,254		—
Home equity loans	1,084		1,084		—
Other 1-4 family residential loans	6,577		6,687		—
Consumer loans	94		97		—
Loans with a specific valuation allowance:
Construction and land development loans	$	3,435	$	3,435	$	2,036
Other commercial real estate loans	14,766		16,177		2,421
Asset based loans	—		—		—
Other commercial loans	259		259		209
Home equity loans	72		72		36
Other 1-4 family residential loans	1,920		1,920		496
Consumer loans	40		40		40
Total:
Construction and land development loans	$	10,338	$	12,692	$	2,036
Other commercial real estate loans	41,922		43,530		2,421
Asset based loans	—		—		—
Other commercial loans	1,352		1,513		209
Home equity loans	1,156		1,156		36
Other 1-4 family residential loans	8,497		8,607		496
Consumer loans	134		137		40

Note 4: (Continued)

The following table summarizes activity in the allowance for loan losses for the three months ended March 31, 2013 by loan category:



(Dollars in thousands)
	Construction		Other CRE			Commercial			Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Balance, beginning of period	$	4,909	$	5,865		$	3,266		$	2,886		$	566		$	—	$	17,492
Provision charged to expense	316		863			42			(4		)	63			—		1,280
Losses charged off	—		(361		)	(119		)	(149		)	(118		)	—		(747		)
Recoveries	34		33			110			18			49			—		244
Balance, end of period	$	5,259	$	6,400		$	3,299		$	2,751		$	560		$	—	$	18,269
Ending balance:
Individually evaluated for impairment	$	2,217	$	2,351		$	299		$	359		$	52		$	—	$	5,278
Ending balance:
Collectively evaluated for impairment	$	3,042	$	4,049		$	3,000		$	2,392		$	508		$	—	$	12,991
Ending balance:
Loans acquired with deteriorated credit quality	$	—	$	—		$	—		$	—		$	—		$	—	$	—
Loans:
Ending balance	$	62,116	$	495,337		$	150,125		$	242,307		$	37,772		$	—	$	987,657
Ending balance:
Individually evaluated for impairment	$	10,115	$	31,715		$	1,191		$	8,371		$	202		$	—	$	51,594
Ending balance:
Collectively evaluated for impairment	$	52,001	$	463,622		$	148,934		$	233,936		$	37,570		$	—	$	936,063
Ending balance:
Loans acquired with deteriorated credit quality	$	—	$	—		$	—		$	—		$	—		$	—	$	—

Note 4: (Continued)

The following table summarizes activity in the allowance for loan losses for the three months ended March 31, 2012 by loan category:



(Dollars in thousands)
	Construction			Other CRE			Commercial			Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Balance, beginning of period	$	4,131		$	4,073		$	3,347		$	2,607		$	795		$	—	$	14,953
Provision charged to expense	32			2,446			(355		)	258			(101		)	—		2,280
Losses charged off	(92		)	(1,353		)	(208		)	(239		)	(169		)	—		(2,061		)
Recoveries	355			114			72			320			51			—		912
Balance, end of period	$	4,426		$	5,280		$	2,856		$	2,946		$	576		$	—	$	16,084
Ending balance:
Individually evaluated for impairment	$	1,689		$	1,340		$	361		$	706		$	39		$	—	$	4,135
Ending balance:
Collectively evaluated for impairment	$	2,737		$	3,940		$	2,495		$	2,240		$	537		$	—	$	11,949
Ending balance:
Loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—	$	—
Loans:
Ending balance	$	70,087		$	498,724		$	144,319		$	224,989		$	41,376		$	—	$	979,495
Ending balance:
Individually evaluated for impairment	$	17,501		$	42,734		$	1,393		$	7,455		$	158		$	—	$	69,241
Ending balance:
Collectively evaluated for impairment	$	52,586		$	455,990		$	142,926		$	217,534		$	41,218		$	—	$	910,254
Ending balance:
Loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—		$	—		$	—	$	—

Note 4: (Continued)

The following table summarizes the balance in the allowance for loan losses at December 31, 2012 by loan category:



(Dollars in thousands)
	Construction		Other CRE		Commercial		Residential		Consumer		Unallocated		Total
Balance December 31, 2012	$	4,909	$	5,865	$	3,266	$	2,886	$	566	$	—	$	17,492
Balance December 31, 2012:
Individually evaluated for impairment	$	2,036	$	2,421	$	209	$	532	$	40	$	—	$	5,238
Balance December 31, 2012:
Collectively evaluated for impairment	$	2,873	$	3,444	$	3,057	$	2,354	$	526	$	—	$	12,254
Balance December 31, 2012:
Loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans:
Balance December 31, 2012:	$	58,745	$	484,114	$	153,550	$	238,728	$	40,336	$	—	$	975,473
Balance December 31, 2012:
Individually evaluated for impairment	$	10,338	$	41,922	$	1,352	$	9,653	$	134	$	—	$	63,399
Balance December 31, 2012:
Collectively evaluated for impairment	$	48,407	$	442,192	$	152,198	$	229,075	$	40,202	$	—	$	912,074
Balance December 31, 2012:
Loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Restructured loans are considered to be impaired loans. A troubled debt restructuring occurs when a creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. That concession either stems from an agreement between the creditor and the debtor or is imposed by law or a court. The following table presents information about the Company’s restructured loan portfolio as of March 31, 2013 and December 31, 2012:



(Dollars in thousands)	March 31, 2013				December 31, 2012
	Recorded Balance		Allowance		Recorded Balance		Allowance
Restructured loans with an allowance:
Construction and land development loans	$	398	$	170	$	—	$	—
Other commercial real estate loans	8,559		984		11,038		1,082
Other commercial loans	63		63		—		—
Other 1-4 family residential loans	59		9		59		12
Restructured loans without an allowance:
Construction and land development loans	1,310		—		1,719		—
Other commercial real estate loans	11,751		—		11,115		—
Other commercial loans	—		—		308		—
Other 1-4 family residential loans	565		—		571		—
Total restructured loans	$	22,705	$	1,226	$	24,810	$	1,094

At March 31, 2013, there were no available credit commitments for restructured loans. At December 31, 2012, there were no available credit commitments for restructured loans.

There were no loans restructured during the first quarter of 2013 or during the first quarter of 2012.

Note 4: (Continued)

There were no loans modified under the terms of a TDR that became 90 days or more delinquent or were foreclosed on during the three month period ended March 31, 2013, that were initially restructured within the prior twelve months.

The following table presents loans modified under the terms of a TDR that became 90 days or more delinquent or were foreclosed on during the three month period ended March 31, 2012, that were initially restructured within the prior twelve months:



(Dollars in thousands)	Three Months Ended March 31, 2012
	Number of Loans	Amortized Cost
Other commercial loans	1	335
Other 1-4 family residential loans	1	152
Total subsequent defaults	2	$	487

The first quarter of 2012 defaults were subsequent 90 day delinquencies.