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LOANS AND PAYMENT PLAN RECEIVABLES
 12 Months Ended
Dec. 31, 2012
LOANS AND PAYMENT PLAN RECEIVABLES [Abstract]  
LOANS AND PAYMENT PLAN RECEIVABLES
NOTE 4 – LOANS AND PAYMENT PLAN RECEIVABLES

Our loan portfolios at December 31 follow:

 
 
2012
 
 
2011
 
 
 
(In thousands)
 
Real estate(1)
 
 
 
 
 
 
Residential first mortgages
 
$
468,636
 
 
$
530,969
 
Residential home equity and other junior mortgages
 
 
121,235
 
 
 
150,127
 
Construction and land development
 
 
56,183
 
 
 
59,136
 
Other(2)
 
 
434,336
 
 
 
446,980
 
Commercial
 
 
132,904
 
 
 
150,633
 
Consumer
 
 
117,077
 
 
 
119,106
 
Payment plan receivables
 
 
84,692
 
 
 
115,018
 
Agricultural
 
 
4,076
 
 
 
4,639
 
Total loans
 
$
1,419,139
 
 
$
1,576,608
 

 
(1)
Includes both residential and non-residential commercial loans secured by real estate.
(2)
Includes loans secured by multi-family residential and non-farm, non-residential property.

Loans are presented net of deferred loan fees (costs) of $(0.2) million at December 31, 2012 and $0.1 million at December 31, 2011. Payment plan receivables totaling $90.8 million and $122.7 million at December 31, 2012 and 2011, respectively, are presented net of unamortized discount of $6.2 million and $7.9 million at December 31, 2012 and 2011, respectively. These payment plan receivables had effective yields of 15% at both December 31, 2012 and 2011. These receivables have various due dates through December, 2014.

An analysis of the allowance for loan losses by portfolio segment for the years ended December 31, follows:

 
 
Commercial
 
 
Mortgage
 
 
Installment
 
 
Payment Plan Receivables
 
 
Unallocated
 
 
Total
 
 
 
(In thousands)
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
18,183
 
 
$
22,885
 
 
$
6,146
 
 
$
197
 
 
$
11,473
 
 
$
58,884
 
Additions (deductions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
 
 
2,351
 
 
 
7,778
 
 
 
15
 
 
 
(3
)
 
 
(3,254
)
 
 
6,887
 
Recoveries credited to allowance
 
 
3,610
 
 
 
1,581
 
 
 
1,311
 
 
 
20
 
 
 
-
 
 
 
6,522
 
Loans charged against the allowance
 
 
(12,588
)
 
 
(10,741
)
 
 
(4,009
)
 
 
(70
)
 
 
-
 
 
 
(27,408
)
Reclassification to loans held for sale
 
 
(154
)
 
 
(56
)
 
 
(85
)
 
 
-
 
 
 
(315
)
 
 
(610
)
Balance at end of period
 
$
11,402
 
 
$
21,447
 
 
$
3,378
 
 
$
144
 
 
$
7,904
 
 
$
44,275
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
23,836
 
 
$
22,642
 
 
$
6,769
 
 
$
389
 
 
$
14,279
 
 
$
67,915
 
Additions (deductions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
 
 
12,988
 
 
 
14,410
 
 
 
3,365
 
 
 
(11
)
 
 
(2,806
)
 
 
27,946
 
Recoveries credited to allowance
 
 
1,850
 
 
 
1,441
 
 
 
1,451
 
 
 
5
 
 
 
-
 
 
 
4,747
 
Loans charged against the allowance
 
 
(20,491
)
 
 
(15,608
)
 
 
(5,439
)
 
 
(186
)
 
 
-
 
 
 
(41,724
)
Balance at end of period
 
$
18,183
 
 
$
22,885
 
 
$
6,146
 
 
$
197
 
 
$
11,473
 
 
$
58,884
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2010
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
41,259
 
 
$
18,434
 
 
$
6,404
 
 
$
754
 
 
$
14,866
 
 
$
81,717
 
Additions (deductions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
 
 
17,716
 
 
 
23,316
 
 
 
6,616
 
 
 
(296
)
 
 
(587
)
 
 
46,765
 
Recoveries credited to allowance
 
 
969
 
 
 
1,155
 
 
 
1,475
 
 
 
13
 
 
 
-
 
 
 
3,612
 
Loans charged against the allowance
 
 
(36,108
)
 
 
(20,263
)
 
 
(7,726
)
 
 
(82
)
 
 
-
 
 
 
(64,179
)
Balance at end of period
 
$
23,836
 
 
$
22,642
 
 
$
6,769
 
 
$
389
 
 
$
14,279
 
 
$
67,915
 
 
Allowance for loan losses and recorded investment in loans by portfolio segment at December 31 follows:

 
 
 
 
 
 
 
 
 
 
 
Payment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Plan
 
 
 
 
 
 
 
 
 
Commercial
 
 
Mortgage
 
 
Installment
 
 
Receivables
 
 
Unallocated
 
 
Total
 
 
 
(In thousands)
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
6,558
 
 
$
12,869
 
 
$
1,582
 
 
$
-
 
 
$
-
 
 
$
21,009
 
Collectively evaluated for impairment
 
 
4,844
 
 
 
8,578
 
 
 
1,796
 
 
 
144
 
 
 
7,904
 
 
 
23,266
 
Total ending allowance balance
 
$
11,402
 
 
$
21,447
 
 
$
3,378
 
 
$
144
 
 
$
7,904
 
 
$
44,275
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
55,634
 
 
$
88,028
 
 
$
7,505
 
 
$
-
 
 
 
 
 
 
$
151,167
 
Collectively evaluated for impairment
 
 
563,316
 
 
 
441,703
 
 
 
183,090
 
 
 
84,692
 
 
 
 
 
 
 
1,272,801
 
Total loans recorded investment
 
 
618,950
 
 
 
529,731
 
 
 
190,595
 
 
 
84,692
 
 
 
 
 
 
 
1,423,968
 
Accrued interest included in recorded investment
 
 
1,692
 
 
 
2,391
 
 
 
746
 
 
 
-
 
 
 
 
 
 
 
4,829
 
Total loans
 
$
617,258
 
 
$
527,340
 
 
$
189,849
 
 
$
84,692
 
 
 
 
 
 
$
1,419,139
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
10,252
 
 
$
10,285
 
 
$
1,762
 
 
$
-
 
 
$
-
 
 
$
22,299
 
Collectively evaluated for impairment
 
 
7,931
 
 
 
12,600
 
 
 
4,384
 
 
 
197
 
 
 
11,473
 
 
 
36,585
 
Total ending allowance balance
 
$
18,183
 
 
$
22,885
 
 
$
6,146
 
 
$
197
 
 
$
11,473
 
 
$
58,884
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
58,674
 
 
$
93,702
 
 
$
7,554
 
 
$
-
 
 
 
 
 
 
$
159,930
 
Collectively evaluated for impairment
 
 
594,665
 
 
 
499,919
 
 
 
212,907
 
 
 
115,018
 
 
 
 
 
 
 
1,422,509
 
Total loans recorded investment
 
 
653,339
 
 
 
593,621
 
 
 
220,461
 
 
 
115,018
 
 
 
 
 
 
 
1,582,439
 
Accrued interest included in recorded investment
 
 
2,184
 
 
 
2,745
 
 
 
902
 
 
 
-
 
 
 
 
 
 
 
5,831
 
Total loans
 
$
651,155
 
 
$
590,876
 
 
$
219,559
 
 
$
115,018
 
 
 
 
 
 
$
1,576,608
 

Non-performing loans at December 31 follows:

 
 
2012
 
 
2011
 
 
 
(In thousands)
 
Non-accrual loans
 
$
32,929
 
 
$
59,309
 
Loans 90 days or more past due and still accruing interest
 
 
7
 
 
 
574
 
Total non-performing loans
 
$
32,936
 
 
$
59,883
 

Non performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. If these loans had continued to accrue interest in accordance with their original terms, approximately $2.3 million, $3.2 million, and $5.0 million of interest income would have been recognized in 2012, 2011 and 2010, respectively. Interest income recorded on these loans was approximately $0.1 million in each of the years ended 2012, 2011 and 2010, respectively.
 
Non performing loans by class as of December 31, follows:

 
 
90+ and
 
 
 
 
 
Total Non-
 
 
 
Still
 
 
Non-
 
 
Performing
 
 
 
Accruing
 
 
Accrual
 
 
Loans
 
 
 
(In thousands)
 
2012
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
$
-
 
 
$
5,611
 
 
$
5,611
 
Land, land development and construction - real estate
 
 
-
 
 
 
4,062
 
 
 
4,062
 
Commercial and industrial
 
 
-
 
 
 
5,080
 
 
 
5,080
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
7
 
 
 
9,654
 
 
 
9,661
 
Resort lending
 
 
-
 
 
 
4,861
 
 
 
4,861
 
Home equity line of credit - 1st lien
 
 
-
 
 
 
529
 
 
 
529
 
Home equity line of credit - 2nd lien
 
 
-
 
 
 
685
 
 
 
685
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
-
 
 
 
1,278
 
 
 
1,278
 
Home equity installment - 2nd lien
 
 
-
 
 
 
675
 
 
 
675
 
Loans not secured by real estate
 
 
-
 
 
 
390
 
 
 
390
 
Other
 
 
-
 
 
 
-
 
 
 
-
 
Payment plan receivables
 
 
 
 
 
 
 
 
 
 
 
 
Full refund
 
 
-
 
 
 
57
 
 
 
57
 
Partial refund
 
 
-
 
 
 
38
 
 
 
38
 
Other
 
 
-
 
 
 
9
 
 
 
9
 
Total recorded investment
 
$
7
 
 
$
32,929
 
 
$
32,936
 
Accrued interest included in recorded investment
 
$
-
 
 
$
-
 
 
$
-
 
2011
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
$
490
 
 
$
13,788
 
 
$
14,278
 
Land, land development and construction - real estate
 
 
43
 
 
 
6,990
 
 
 
7,033
 
Commercial and industrial
 
 
-
 
 
 
7,984
 
 
 
7,984
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
54
 
 
 
15,929
 
 
 
15,983
 
Resort lending
 
 
-
 
 
 
8,819
 
 
 
8,819
 
Home equity line of credit - 1st lien
 
 
-
 
 
 
523
 
 
 
523
 
Home equity line of credit - 2nd lien
 
 
-
 
 
 
889
 
 
 
889
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
-
 
 
 
1,542
 
 
 
1,542
 
Home equity installment - 2nd lien
 
 
-
 
 
 
1,023
 
 
 
1,023
 
Loans not secured by real estate
 
 
-
 
 
 
880
 
 
 
880
 
Other
 
 
-
 
 
 
4
 
 
 
4
 
Payment plan receivables
 
 
 
 
 
 
 
 
 
 
 
 
Full refund
 
 
-
 
 
 
491
 
 
 
491
 
Partial refund
 
 
-
 
 
 
424
 
 
 
424
 
Other
 
 
-
 
 
 
23
 
 
 
23
 
Total recorded investment
 
$
587
 
 
$
59,309
 
 
$
59,896
 
Accrued interest included in recorded investment
 
$
13
 
 
$
-
 
 
$
13
 
 
An aging analysis of loans by class at December 31 follows:

 
 
Loans Past Due
 
 
Loans not
 
 
Total
 
 
 
30-59 days
 
 
60-89 days
 
 
90+ days
 
 
Total
 
 
Past Due
 
 
Loans
 
 
 
(In thousands)
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
$
3,734
 
 
$
609
 
 
$
2,826
 
 
$
7,169
 
 
$
215,623
 
 
$
222,792
 
Land, land development and construction - real estate
 
 
336
 
 
 
-
 
 
 
1,176
 
 
 
1,512
 
 
 
41,750
 
 
 
43,262
 
Commercial and industrial
 
 
2,522
 
 
 
654
 
 
 
1,913
 
 
 
5,089
 
 
 
347,807
 
 
 
352,896
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
4,429
 
 
 
1,115
 
 
 
9,661
 
 
 
15,205
 
 
 
279,132
 
 
 
294,337
 
Resort lending
 
 
748
 
 
 
370
 
 
 
4,861
 
 
 
5,979
 
 
 
164,414
 
 
 
170,393
 
Home equity line of credit - 1st lien
 
 
453
 
 
 
51
 
 
 
529
 
 
 
1,033
 
 
 
18,003
 
 
 
19,036
 
Home equity line of credit - 2nd lien
 
 
442
 
 
 
32
 
 
 
685
 
 
 
1,159
 
 
 
44,806
 
 
 
45,965
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
599
 
 
 
140
 
 
 
1,278
 
 
 
2,017
 
 
 
30,368
 
 
 
32,385
 
Home equity installment - 2nd lien
 
 
430
 
 
 
125
 
 
 
675
 
 
 
1,230
 
 
 
38,956
 
 
 
40,186
 
Loans not secured by real estate
 
 
899
 
 
 
259
 
 
 
390
 
 
 
1,548
 
 
 
113,751
 
 
 
115,299
 
Other
 
 
24
 
 
 
12
 
 
 
-
 
 
 
36
 
 
 
2,689
 
 
 
2,725
 
Payment plan receivables
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Full refund
 
 
2,249
 
 
 
552
 
 
 
57
 
 
 
2,858
 
 
 
77,335
 
 
 
80,193
 
Partial refund
 
 
112
 
 
 
46
 
 
 
38
 
 
 
196
 
 
 
4,119
 
 
 
4,315
 
Other
 
 
3
 
 
 
6
 
 
 
9
 
 
 
18
 
 
 
166
 
 
 
184
 
Total recorded investment
 
$
16,980
 
 
$
3,971
 
 
$
24,098
 
 
$
45,049
 
 
$
1,378,919
 
 
$
1,423,968
 
Accrued interest included in recorded investment
 
$
146
 
 
$
43
 
 
$
-
 
 
$
189
 
 
$
4,640
 
 
$
4,829
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
$
1,701
 
 
$
937
 
 
$
6,408
 
 
$
9,046
 
 
$
264,620
 
 
$
273,666
 
Land, land development and construction - real estate
 
 
487
 
 
 
66
 
 
 
2,720
 
 
 
3,273
 
 
 
51,453
 
 
 
54,726
 
Commercial and industrial
 
 
1,861
 
 
 
1,132
 
 
 
3,516
 
 
 
6,509
 
 
 
318,438
 
 
 
324,947
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
3,507
 
 
 
1,418
 
 
 
15,983
 
 
 
20,908
 
 
 
294,771
 
 
 
315,679
 
Resort lending
 
 
2,129
 
 
 
932
 
 
 
8,819
 
 
 
11,880
 
 
 
184,943
 
 
 
196,823
 
Home equity line of credit - 1st lien
 
 
96
 
 
 
196
 
 
 
523
 
 
 
815
 
 
 
24,705
 
 
 
25,520
 
Home equity line of credit - 2nd lien
 
 
506
 
 
 
159
 
 
 
889
 
 
 
1,554
 
 
 
54,045
 
 
 
55,599
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
757
 
 
 
264
 
 
 
1,542
 
 
 
2,563
 
 
 
41,239
 
 
 
43,802
 
Home equity installment - 2nd lien
 
 
676
 
 
 
365
 
 
 
1,023
 
 
 
2,064
 
 
 
51,224
 
 
 
53,288
 
Loans not secured by real estate
 
 
1,173
 
 
 
463
 
 
 
880
 
 
 
2,516
 
 
 
117,661
 
 
 
120,177
 
Other
 
 
36
 
 
 
10
 
 
 
4
 
 
 
50
 
 
 
3,144
 
 
 
3,194
 
Payment plan receivables
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Full refund
 
 
2,943
 
 
 
951
 
 
 
491
 
 
 
4,385
 
 
 
99,284
 
 
 
103,669
 
Partial refund
 
 
380
 
 
 
200
 
 
 
424
 
 
 
1,004
 
 
 
9,918
 
 
 
10,922
 
Other
 
 
23
 
 
 
24
 
 
 
23
 
 
 
70
 
 
 
357
 
 
 
427
 
Total recorded investment
 
$
16,275
 
 
$
7,117
 
 
$
43,245
 
 
$
66,637
 
 
$
1,515,802
 
 
$
1,582,439
 
Accrued interest included in recorded investment
 
$
160
 
 
$
105
 
 
$
13
 
 
$
278
 
 
$
5,553
 
 
$
5,831
 
 
Impaired loans are as follows :

 
 
2012
 
 
2011
 
 
 
(In thousands)
 
Impaired loans with no allocated allowance
 
 
 
 
 
 
TDR
 
$
25,501
 
 
$
26,945
 
Non - TDR
 
 
418
 
 
 
423
 
Impaired loans with an allocated allowance
 
 
 
 
 
 
 
 
TDR - allowance based on collateral
 
 
16,231
 
 
 
20,142
 
TDR - allowance based on present value cash flow
 
 
101,931
 
 
 
98,130
 
Non - TDR - allowance based on collateral
 
 
6,580
 
 
 
13,773
 
Non - TDR - allowance based on present value cash flow
 
 
-
 
 
 
-
 
Total impaired loans
 
$
150,661
 
 
$
159,413
 
 
 
 
 
 
 
 
 
 
Amount of allowance for loan losses allocated
 
 
 
 
 
 
 
 
TDR - allowance based on collateral
 
$
5,060
 
 
$
6,004
 
TDR - allowance based on present value cash flow
 
 
14,462
 
 
 
12,048
 
Non - TDR - allowance based on collateral
 
 
1,487
 
 
 
4,247
 
Non - TDR - allowance based on present value cash flow
 
 
-
 
 
 
-
 
Total amount of allowance for loan losses allocated
 
$
21,009
 
 
$
22,299
 
 
Impaired loans by class as of December 31, are as follows (1):

 
 
2012
 
 
2011
 
 
 
Recorded Investment
 
 
Unpaid Principal Balance
 
 
Related Allowance
 
 
Recorded Investment
 
 
Unpaid Principal Balance
 
 
Related Allowance
 
With no related allowance recorded:
 
(In thousands)
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
$
4,050
 
 
$
4,672
 
 
$
-
 
 
$
4,626
 
 
$
6,386
 
 
$
-
 
Land, land development & construction-real estate
 
 
3,304
 
 
 
3,294
 
 
 
-
 
 
 
219
 
 
 
243
 
 
 
-
 
Commercial and industrial
 
 
2,611
 
 
 
2,592
 
 
 
-
 
 
 
3,593
 
 
 
3,677
 
 
 
-
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
5,666
 
 
 
7,921
 
 
 
-
 
 
 
6,975
 
 
 
9,242
 
 
 
-
 
Resort lending
 
 
5,383
 
 
 
5,539
 
 
 
-
 
 
 
7,156
 
 
 
7,680
 
 
 
-
 
Home equity line of credit - 1st lien
 
 
15
 
 
 
31
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Home equity line of credit - 2nd lien
 
 
43
 
 
 
118
 
 
 
-
 
 
 
134
 
 
 
211
 
 
 
-
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
2,027
 
 
 
2,219
 
 
 
-
 
 
 
2,100
 
 
 
2,196
 
 
 
-
 
Home equity installment - 2nd lien
 
 
2,278
 
 
 
2,278
 
 
 
-
 
 
 
1,987
 
 
 
1,987
 
 
 
-
 
Loans not secured by real estate
 
 
610
 
 
 
681
 
 
 
-
 
 
 
637
 
 
 
688
 
 
 
-
 
Other
 
 
20
 
 
 
20
 
 
 
-
 
 
 
24
 
 
 
24
 
 
 
-
 
 
 
 
26,007
 
 
 
29,365
 
 
 
-
 
 
 
27,451
 
 
 
32,334
 
 
 
-
 
With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
 
20,628
 
 
 
24,250
 
 
 
1,822
 
 
 
22,781
 
 
 
29,400
 
 
 
3,642
 
Land, land development & construction-real estate
 
 
8,808
 
 
 
11,971
 
 
 
1,986
 
 
 
12,362
 
 
 
14,055
 
 
 
3,633
 
Commercial and industrial
 
 
16,233
 
 
 
18,564
 
 
 
2,750
 
 
 
15,093
 
 
 
18,357
 
 
 
2,977
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
58,494
 
 
 
60,497
 
 
 
8,518
 
 
 
61,214
 
 
 
63,464
 
 
 
7,716
 
Resort lending
 
 
18,380
 
 
 
18,621
 
 
 
4,321
 
 
 
18,159
 
 
 
19,351
 
 
 
2,534
 
Home equity line of credit - 1st lien
 
 
47
 
 
 
46
 
 
 
30
 
 
 
64
 
 
 
73
 
 
 
35
 
Home equity line of credit - 2nd lien
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
1,215
 
 
 
1,240
 
 
 
610
 
 
 
1,232
 
 
 
1,293
 
 
 
660
 
Home equity installment - 2nd lien
 
 
1,161
 
 
 
1,174
 
 
 
930
 
 
 
1,421
 
 
 
1,458
 
 
 
1,062
 
Loans not secured by real estate
 
 
194
 
 
 
194
 
 
 
42
 
 
 
153
 
 
 
156
 
 
 
40
 
Other
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
 
125,160
 
 
 
136,557
 
 
 
21,009
 
 
 
132,479
 
 
 
147,607
 
 
 
22,299
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
 
24,678
 
 
 
28,922
 
 
 
1,822
 
 
 
27,407
 
 
 
35,786
 
 
 
3,642
 
Land, land development & construction-real estate
 
 
12,112
 
 
 
15,265
 
 
 
1,986
 
 
 
12,581
 
 
 
14,298
 
 
 
3,633
 
Commercial and industrial
 
 
18,844
 
 
 
21,156
 
 
 
2,750
 
 
 
18,686
 
 
 
22,034
 
 
 
2,977
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
64,160
 
 
 
68,418
 
 
 
8,518
 
 
 
68,189
 
 
 
72,706
 
 
 
7,716
 
Resort lending
 
 
23,763
 
 
 
24,160
 
 
 
4,321
 
 
 
25,315
 
 
 
27,031
 
 
 
2,534
 
Home equity line of credit - 1st lien
 
 
62
 
 
 
77
 
 
 
30
 
 
 
64
 
 
 
73
 
 
 
35
 
Home equity line of credit - 2nd lien
 
 
43
 
 
 
118
 
 
 
-
 
 
 
134
 
 
 
211
 
 
 
-
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
3,242
 
 
 
3,459
 
 
 
610
 
 
 
3,332
 
 
 
3,489
 
 
 
660
 
Home equity installment - 2nd lien
 
 
3,439
 
 
 
3,452
 
 
 
930
 
 
 
3,408
 
 
 
3,445
 
 
 
1,062
 
Loans not secured by real estate
 
 
804
 
 
 
875
 
 
 
42
 
 
 
790
 
 
 
844
 
 
 
40
 
Other
 
 
20
 
 
 
20
 
 
 
-
 
 
 
24
 
 
 
24
 
 
 
-
 
Total
 
$
151,167
 
 
$
165,922
 
 
$
21,009
 
 
$
159,930
 
 
$
179,941
 
 
$
22,299
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued interest included in recorded investment
 
$
506
 
 
 
 
 
 
 
 
 
 
$
517
 
 
 
 
 
 
 
 
 

(1)
There were no impaired payment plan receivables at December 31, 2012 or 2011.
 
Average recorded investment in and interest income earned on impaired loans by class for the years ended December 31, follows:

 
 
2012
 
 
2011
 
 
 
Average Recorded Investment
 
 
Interest Income Recognized
 
 
Average Recorded Investment
 
 
Interest Income Recognized
 
With no related allowance recorded:
 
(In thousands)
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
$
2,981
 
 
$
166
 
 
$
3,170
 
 
$
170
 
Land, land development & construction-real estate
 
 
2,549
 
 
 
150
 
 
 
613
 
 
 
35
 
Commercial and industrial
 
 
3,526
 
 
 
246
 
 
 
2,874
 
 
 
70
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
6,952
 
 
 
239
 
 
 
8,566
 
 
 
299
 
Resort lending
 
 
6,148
 
 
 
220
 
 
 
7,751
 
 
 
330
 
Home equity line of credit - 1st lien
 
 
10
 
 
 
-
 
 
 
-
 
 
 
-
 
Home equity line of credit - 2nd lien
 
 
62
 
 
 
3
 
 
 
118
 
 
 
4
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
1,961
 
 
 
97
 
 
 
1,955
 
 
 
96
 
Home equity installment - 2nd lien
 
 
2,093
 
 
 
111
 
 
 
2,014
 
 
 
93
 
Loans not secured by real estate
 
 
549
 
 
 
30
 
 
 
598
 
 
 
31
 
Other
 
 
22
 
 
 
2
 
 
 
15
 
 
 
2
 
 
 
 
26,853
 
 
 
1,264
 
 
 
27,674
 
 
 
1,130
 
With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
 
23,508
 
 
 
571
 
 
 
18,812
 
 
 
117
 
Land, land development & construction-real estate
 
 
10,305
 
 
 
183
 
 
 
9,828
 
 
 
114
 
Commercial and industrial
 
 
17,828
 
 
 
467
 
 
 
11,501
 
 
 
352
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
59,533
 
 
 
2,613
 
 
 
62,811
 
 
 
2,692
 
Resort lending
 
 
18,360
 
 
 
780
 
 
 
21,750
 
 
 
734
 
Home equity line of credit - 1st lien
 
 
55
 
 
 
2
 
 
 
32
 
 
 
2
 
Home equity line of credit - 2nd lien
 
 
19
 
 
 
-
 
 
 
9
 
 
 
-
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
1,432
 
 
 
50
 
 
 
1,408
 
 
 
60
 
Home equity installment - 2nd lien
 
 
1,325
 
 
 
51
 
 
 
1,466
 
 
 
66
 
Loans not secured by real estate
 
 
221
 
 
 
10
 
 
 
168
 
 
 
6
 
Other
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
 
132,586
 
 
 
4,727
 
 
 
127,785
 
 
 
4,143
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
 
26,489
 
 
 
737
 
 
 
21,982
 
 
 
287
 
Land, land development & construction-real estate
 
 
12,854
 
 
 
333
 
 
 
10,441
 
 
 
149
 
Commercial and industrial
 
 
21,354
 
 
 
713
 
 
 
14,375
 
 
 
422
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
66,485
 
 
 
2,852
 
 
 
71,377
 
 
 
2,991
 
Resort lending
 
 
24,508
 
 
 
1,000
 
 
 
29,501
 
 
 
1,064
 
Home equity line of credit - 1st lien
 
 
65
 
 
 
2
 
 
 
32
 
 
 
2
 
Home equity line of credit - 2nd lien
 
 
81
 
 
 
3
 
 
 
127
 
 
 
4
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
3,393
 
 
 
147
 
 
 
3,363
 
 
 
156
 
Home equity installment - 2nd lien
 
 
3,418
 
 
 
162
 
 
 
3,480
 
 
 
159
 
Loans not secured by real estate
 
 
770
 
 
 
40
 
 
 
766
 
 
 
37
 
Other
 
 
22
 
 
 
2
 
 
 
15
 
 
 
2
 
Total
 
$
159,439
 
 
$
5,991
 
 
$
155,459
 
 
$
5,273
 

(1)
There were no impaired payment plan receivables during the years ending December 31, 2012 and 2011.

Our average investment in impaired loans was approximately $159.4 million, $155.5 million and $168.0 million in 2012, 2011 and 2010, respectively. Cash receipts on impaired loans on non-accrual status are generally applied to the principal balance. Interest income recognized on impaired loans was approximately $6.0 million, $5.3 million and $5.7 million in 2012, 2011 and 2010, respectively of which the majority of these amounts were received in cash.

Troubled debt restructurings at December 31 follow:

 
 
2012
 
 
 
Commercial
 
 
Retail
 
 
Total
 
 
 
(In thousands)
 
Performing TDR's
 
$
40,753
 
 
$
85,977
 
 
$
126,730
 
Non-performing TDR's(1)
 
 
7,756
 
 
 
9,177
(2)
 
 
16,933
 
Total
 
$
48,509
 
 
$
95,154
 
 
$
143,663
 

 
 
2011
 
 
 
Commercial
 
 
Retail
 
 
Total
 
 
 
(In thousands)
 
Performing TDR's
 
$
29,799
 
 
$
86,770
 
 
$
116,569
 
Non-performing TDR's(1)
 
 
14,567
 
 
 
14,081
(2)
 
 
28,648
 
Total
 
$
44,366
 
 
$
100,851
 
 
$
145,217
 

(1)
Included in non-performing loans table above.
(2)
Also includes loans on non-accrual at the time of modification until six payments are received on a timely basis.

We have allocated $19.5 million and $18.1 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2012 and 2011, respectively. We have committed to lend additional amounts totaling up to $0.02 million and zero as of December 31, 2012 and 2011, respectively, to customers with outstanding loans that are classified as troubled debt restructurings.

During the year ending December 31, 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans generally included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan have generally been for periods ranging from 9 months to 60 months but have extended to as much as 480 months in certain circumstances. Modifications involving an extension of the maturity date have generally been for periods ranging from 1 month to 60 months but have extended to as much as 472 months in certain circumstances.
 
Loans that have been classified as troubled debt restructurings during the years ended December 31 follows:

 
 
Number of Contracts
 
 
Pre-modification Recorded
Balance
 
 
Post-modification Recorded Balance
 
2012
 
(Dollars in thousands)
Commercial
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
 
20
 
 
$
9,464
 
 
$
8,568
 
Land, land development & construction-real estate
 
 
9
 
 
 
4,800
 
 
 
4,858
 
Commercial and industrial
 
 
50
 
 
 
9,951
 
 
 
7,905
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
66
 
 
 
8,900
 
 
 
8,488
 
Resort lending
 
 
31
 
 
 
7,750
 
 
 
7,514
 
Home equity line of credit - 1st lien
 
 
1
 
 
 
15
 
 
 
-
 
Home equity line of credit - 2nd lien
 
 
-
 
 
 
-
 
 
 
-
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
18
 
 
 
666
 
 
 
632
 
Home equity installment - 2nd lien
 
 
24
 
 
 
784
 
 
 
768
 
Loans not secured by real estate
 
 
13
 
 
 
325
 
 
 
304
 
Other
 
 
-
 
 
 
-
 
 
 
-
 
Total
 
 
232
 
 
$
42,655
 
 
$
39,037
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
 
42
 
 
$
21,061
 
 
$
17,679
 
Land, land development & construction-real estate
 
 
20
 
 
 
10,801
 
 
 
7,464
 
Commercial and industrial
 
 
64
 
 
 
11,133
 
 
 
10,649
 
Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
1-4 family
 
 
73
 
 
 
9,933
 
 
 
9,423
 
Resort lending
 
 
33
 
 
 
8,893
 
 
 
8,749
 
Home equity line of credit - 1st lien
 
 
2
 
 
 
69
 
 
 
64
 
Home equity line of credit - 2nd lien
 
 
1
 
 
 
23
 
 
 
18
 
Installment
 
 
 
 
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
21
 
 
 
678
 
 
 
618
 
Home equity installment - 2nd lien
 
 
16
 
 
 
535
 
 
 
514
 
Loans not secured by real estate
 
 
26
 
 
 
455
 
 
 
442
 
Other
 
 
-
 
 
 
-
 
 
 
-
 
Total
 
 
298
 
 
$
63,581
 
 
$
55,620
 

The troubled debt restructurings described above increased the allowance for loan losses by $1.6 million and $3.4 million during the years ended December 31, 2012 and 2011, respectively and resulted in charge offs of $1.0 million and $4.7 million during the years ended December 31, 2012 and 2011, respectively.
 
Loans that have been classified as troubled debt restructured during the past twelve months and that have subsequently defaulted during the years ended December 31 follows:

   
Number of Contracts
   
Recorded Balance
 
2012
 
(Dollars in thousands)
 
Commercial
 
 
 
 
 
 
Income producing - real estate
 
 
2
 
 
$
827
 
Land, land development & construction-real estate
 
 
-
 
 
 
-
 
Commercial and industrial
 
 
5
 
 
 
230
 
Mortgage
 
 
 
 
 
 
 
 
1-4 family
 
 
2
 
 
 
148
 
Resort lending
 
 
4
 
 
 
887
 
Home equity line of credit - 1st lien
 
 
-
 
 
 
-
 
Home equity line of credit - 2nd lien
 
 
-
 
 
 
-
 
Installment
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
2
 
 
 
234
 
Home equity installment - 2nd lien
 
 
1
 
 
 
20
 
Loans not secured by real estate
 
 
-
 
 
 
-
 
Other
 
 
-
 
 
 
-
 
 
 
 
16
 
 
$
2,346
 
 
 
 
 
 
 
 
 
 
2011
 
 
 
Commercial
 
 
 
 
 
 
 
 
Income producing - real estate
 
 
7
 
 
$
3,604
 
Land, land development & construction-real estate
 
 
4
 
 
 
3,036
 
Commercial and industrial
 
 
2
 
 
 
492
 
Mortgage
 
 
 
 
 
 
 
 
1-4 family
 
 
10
 
 
 
1,191
 
Resort lending
 
 
6
 
 
 
1,311
 
Home equity line of credit - 1st lien
 
 
-
 
 
 
-
 
Home equity line of credit - 2nd lien
 
 
-
 
 
 
-
 
Installment
 
 
 
 
 
 
 
 
Home equity installment - 1st lien
 
 
1
 
 
 
19
 
Home equity installment - 2nd lien
 
 
5
 
 
 
301
 
Loans not secured by real estate
 
 
-
 
 
 
-
 
Other
 
 
-
 
 
 
-
 
 
 
 
35
 
 
$
9,954
 

A loan is considered to be in payment default generally once it is 90 days contractually past due under the modified terms for commercial loans and installment loans and when four consecutive payments are missed for mortgage loans.

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $0.3 million and $1.9 million during the years ended December 31, 2012 and 2011, respectively and resulted in charge offs of $0.8 million and $1.8 million during the years ended December 31, 2012 and 2011, respectively.

The terms of certain other loans were modified during the years ending December 31, 2012 and 2011 that did not meet the definition of a troubled debt restructuring. The modification of these loans could have included modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.
 
In order to determine whether a borrower is experiencing financial difficulty, we perform an evaluation of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under our internal underwriting policy.

Credit Quality Indicators – As part of our on on-going monitoring of the credit quality of our loan portfolios, we track certain credit quality indicators including (a) weighted-average risk grade of commercial loans, (b) the level of classified commercial loans (c) credit scores of mortgage and installment loan borrowers (d) investment grade of certain counterparties for payment plan receivables and (e) delinquency history and non-performing loans.

For commercial loans we use a loan rating system that is similar to those employed by state and federal banking regulators. Loans are graded on a scale of 1 to 12. A description of the general characteristics of the ratings follows:

Rating 1 through 6: These loans are generally referred to as our "non-watch" commercial credits that include very high or exceptional credit fundamentals through acceptable credit fundamentals.

Rating 7 and 8: These loans are generally referred to as our "watch" commercial credits. This rating includes loans to borrowers that exhibit potential credit weakness or downward trends. If not checked or cured these trends could weaken our asset or credit position. While potentially weak, no loss of principle or interest is envisioned with these ratings.

Rating 9: These loans are generally referred to as our "substandard accruing" commercial credits. This rating includes loans to borrowers that exhibit a well-defined weakness where payment default is probable and loss is possible if deficiencies are not corrected. Generally, loans with this rating are considered collectible as to both principle and interest primarily due to collateral coverage.

Rating 10 and 11: These loans are generally referred to as our "substandard - non-accrual" and "doubtful" commercial credits. This rating includes loans to borrowers with weaknesses that make collection of debt in full, on the basis of current facts, conditions and values at best questionable and at worst improbable. All of these loans are placed in non-accrual.

Rating 12: These loans are generally referred to as our "loss" commercial credits. This rating includes loans to borrowers that are deemed incapable of repayment and are charged-off.
 
The following table summarizes loan ratings by loan class for our commercial loan segment at December 31:

 
 
Commercial
 
 
 
 
 
 
 
 
 
Substandard
 
 
Non-
 
 
 
 
 
 
Non-watch
 
 
Watch
 
 
Accrual
 
 
Accrual
 
 
 
 
 
 
1-6
 
 
7-8
 
 
9
 
 
10-11
 
 
Total
 
 
 
(In thousands)
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
$
183,530
 
 
$
27,096
 
 
$
6,555
 
 
$
5,611
 
 
$
222,792
 
Land, land development and construction - real estate
 
 
32,784
 
 
 
3,457
 
 
 
2,959
 
 
 
4,062
 
 
 
43,262
 
Commercial and industrial
 
 
307,566
 
 
 
26,954
 
 
 
13,296
 
 
 
5,080
 
 
 
352,896
 
Total
 
$
523,880
 
 
$
57,507
 
 
$
22,810
 
 
$
14,753
 
 
$
618,950
 
Accrued interest included in total
 
$
1,417
 
 
$
163
 
 
$
112
 
 
$
-
 
 
$
1,692
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income producing - real estate
 
$
201,655
 
 
$
52,438
 
 
$
5,785
 
 
$
13,788
 
 
$
273,666
 
Land, land development and construction - real estate
 
 
33,515
 
 
 
9,421
 
 
 
4,800
 
 
 
6,990
 
 
 
54,726
 
Commercial and industrial
 
 
275,245
 
 
 
27,783
 
 
 
13,935
 
 
 
7,984
 
 
 
324,947
 
Total
 
$
510,415
 
 
$
89,642
 
 
$
24,520
 
 
$
28,762
 
 
$
653,339
 
Accrued interest included in total
 
$
1,677
 
 
$
381
 
 
$
126
 
 
$
-
 
 
$
2,184
 
 
For each of our mortgage and consumer segment classes we generally monitor credit quality based on the credit scores of the borrowers. These credit scores are generally updated at least annually. The following table summarizes credit scores by loan class for our mortgage and installment loan segments at December 31:

 
 
 
Mortgage (1)
 
 
 
 
 
 
 
 
 
 
Home
 
 
Home
 
 
 
 
 
 
 
 
 
 
Resort
 
 
Equity
 
 
Equity
 
 
 
 
 
 
 
1-4 Family
 
 
Lending
 
 
1st Lien
 
 
2nd Lien
 
 
Total
 
 
 
 
(In thousands)
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
 
 
$
19,638
 
 
$
15,430
 
 
$
3,031
 
 
$
5,515
 
 
$
43,614
 
750-799 
 
 
62,419
 
 
 
67,094
 
 
 
4,758
 
 
 
12,783
 
 
 
147,054
 
700-749 
 
 
59,594
 
 
 
41,860
 
 
 
3,293
 
 
 
9,177
 
 
 
113,924
 
650-699 
 
 
57,584
 
 
 
17,685
 
 
 
2,309
 
 
 
7,987
 
 
 
85,565
 
600-649 
 
 
31,465
 
 
 
12,317
 
 
 
3,311
 
 
 
4,775
 
 
 
51,868
 
550-599 
 
 
27,739
 
 
 
7,887
 
 
 
964
 
 
 
2,754
 
 
 
39,344
 
500-549 
 
 
20,243
 
 
 
1,212
 
 
 
656
 
 
 
1,997
 
 
 
24,108
 
Under 500
 
 
 
9,470
 
 
 
1,637
 
 
 
456
 
 
 
789
 
 
 
12,352
 
Unknown
 
 
 
6,185
 
 
 
5,271
 
 
 
258
 
 
 
188
 
 
 
11,902
 
Total
 
 
$
294,337
 
 
$
170,393
 
 
$
19,036
 
 
$
45,965
 
 
$
529,731
 
Accrued interest included in total
 
 
$
1,319
 
 
$
750
 
 
$
91
 
 
$
231
 
 
$
2,391
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 2011 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
 
 
$
26,509
 
 
$
17,345
 
 
$
4,062
 
 
$
6,317
 
 
$
54,233
 
750-799 
 
 
63,746
 
 
 
76,381
 
 
 
8,058
 
 
 
16,892
 
 
 
165,077
 
700-749 
 
 
55,047
 
 
 
53,210
 
 
 
4,280
 
 
 
12,131
 
 
 
124,668
 
650-699 
 
 
54,579
 
 
 
21,579
 
 
 
2,854
 
 
 
7,909
 
 
 
86,921
 
600-649 
 
 
40,977
 
 
 
12,750
 
 
 
2,485
 
 
 
5,066
 
 
 
61,278
 
550-599 
 
 
29,732
 
 
 
10,698
 
 
 
1,547
 
 
 
3,466
 
 
 
45,443
 
500-549 
 
 
28,573
 
 
 
3,716
 
 
 
1,615
 
 
 
2,758
 
 
 
36,662
 
Under 500
 
 
 
12,434
 
 
 
565
 
 
 
539
 
 
 
886
 
 
 
14,424
 
Unknown
 
 
 
4,082
 
 
 
579
 
 
 
80
 
 
 
174
 
 
 
4,915
 
Total
 
 
$
315,679
 
 
$
196,823
 
 
$
25,520
 
 
$
55,599
 
 
$
593,621
 
Accrued interest included in total
 
 
$
1,404
 
 
$
928
 
 
$
123
 
 
$
290
 
 
$
2,745
 

 
 
 
Installment(1)
 
 
 
 
Home
 
 
Home
 
 
Loans not
 
 
 
 
 
 
 
 
 
 
Equity
 
 
Equity
 
 
Secured by
 
 
 
 
 
 
 
 
 
 
1st Lien
 
 
2nd Lien
 
 
Real Estate
 
 
Other
 
 
Total
 
 
 
 
(In thousands)
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
 
 
$
3,909
 
 
$
3,265
 
 
$
19,293
 
 
$
38
 
 
$
26,505
 
750-799 
 
 
7,394
 
 
 
11,300
 
 
 
43,740
 
 
 
462
 
 
 
62,896
 
700-749 
 
 
4,884
 
 
 
8,826
 
 
 
24,267
 
 
 
786
 
 
 
38,763
 
650-699 
 
 
5,925
 
 
 
7,164
 
 
 
13,758
 
 
 
710
 
 
 
27,557
 
600-649 
 
 
4,360
 
 
 
4,214
 
 
 
6,442
 
 
 
367
 
 
 
15,383
 
550-599 
 
 
3,226
 
 
 
2,716
 
 
 
3,428
 
 
 
188
 
 
 
9,558
 
500-549 
 
 
1,722
 
 
 
1,403
 
 
 
2,154
 
 
 
114
 
 
 
5,393
 
Under 500
 
 
 
760
 
 
 
1,195
 
 
 
895
 
 
 
42
 
 
 
2,892
 
Unknown
 
 
 
205
 
 
 
103
 
 
 
1,322
 
 
 
18
 
 
 
1,648
 
Total
 
 
$
32,385
 
 
$
40,186
 
 
$
115,299
 
 
$
2,725
 
 
$
190,595
 
Accrued interest included in total
 
 
$
137
 
 
$
157
 
 
$
429
 
 
$
23
 
 
$
746
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800 and above
 
 
$
5,466
 
 
$
5,047
 
 
$
18,245
 
 
$
70
 
 
$
28,828
 
750-799 
 
 
11,651
 
 
 
16,475
 
 
 
41,501
 
 
 
572
 
 
 
70,199
 
700-749 
 
 
6,899
 
 
 
10,693
 
 
 
23,174
 
 
 
883
 
 
 
41,649
 
650-699 
 
 
7,144
 
 
 
8,407
 
 
 
15,646
 
 
 
673
 
 
 
31,870
 
600-649 
 
 
4,943
 
 
 
5,412
 
 
 
7,599
 
 
 
434
 
 
 
18,388
 
550-599 
 
 
3,435
 
 
 
3,221
 
 
 
4,573
 
 
 
270
 
 
 
11,499
 
500-549 
 
 
3,021
 
 
 
3,145
 
 
 
3,011
 
 
 
183
 
 
 
9,360
 
Under 500
 
 
 
1,160
 
 
 
854
 
 
 
1,391
 
 
 
50
 
 
 
3,455
 
Unknown
 
 
 
83
 
 
 
34
 
 
 
5,037
 
 
 
59
 
 
 
5,213
 
Total
 
 
$
43,802
 
 
$
53,288
 
 
$
120,177
 
 
$
3,194
 
 
$
220,461
 
Accrued interest included in total
 
 
$
176
 
 
$
208
 
 
$
489
 
 
$
29
 
 
$
902
 

(1)
Credit scores have been updated within the last twelve months.

Mepco is a wholly-owned subsidiary of our Bank that operates a vehicle service contract payment plan business throughout the United States. See note #11 for more information about Mepco's business. As of December 31, 2012, approximately 94.7% of Mepco's outstanding payment plan receivables relate to programs in which a third party insurer or risk retention group is obligated to pay Mepco the full refund owing upon cancellation of the related service contract (including with respect to both the portion funded to the service contract seller and the portion funded to the administrator). These receivables are shown as "Full Refund" in the table below. Another approximately 5.1% of Mepco's outstanding payment plan receivables as of December 31, 2012, relate to programs in which a third party insurer or risk retention group is obligated to pay Mepco the refund owing upon cancellation only with respect to the unearned portion previously funded by Mepco to the administrator (but not to the service contract seller). These receivables are shown as "Partial Refund" in the table below. The balance of Mepco's outstanding payment plan receivables relate to programs in which there is no insurer or risk retention group that has any contractual liability to Mepco for any portion of the refund amount. These receivables are shown as "Other" in the table below. For each class of our payment plan receivables we monitor credit ratings of the counterparties as we evaluate the credit quality of this portfolio.
 
Although Mepco has contractual recourse against various counterparties for refunds owing upon cancellation of vehicle service contracts, please see note #11 regarding certain risks and difficulties associated with collecting these refunds.

The following table summarizes credit ratings by class of payment plan receivable at December 31:

 
 
 
Payment Plan Receivables
 
 
 
 
Full
 
 
Partial
 
 
 
 
 
 
 
 
 
 
Refund
 
 
Refund
 
 
Other
 
 
Total
 
 
 
 
(In thousands)
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
AM Best rating
 
 
 
 
 
 
 
 
 
 
 
 
 
A+ 
 
$
-
 
 
$
-
 
 
$
110
 
 
$
110
 
A 
 
 
24,825
 
 
 
3,916
 
 
 
-
 
 
 
28,741
 
A- 
 
 
19,310
 
 
 
399
 
 
 
-
 
 
 
19,709
 
B+ 
 
 
56
 
 
 
-
 
 
 
-
 
 
 
56
 
B 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Not rated
 
 
 
36,002
 
 
 
-
 
 
 
74
 
 
 
36,076
 
Total
 
 
$
80,193
 
 
$
4,315
 
 
$
184
 
 
$
84,692
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AM Best rating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A+ 
 
$
-
 
 
$
118
 
 
$
7
 
 
$
125
 
A 
 
 
32,461
 
 
 
165
 
 
 
269
 
 
 
32,895
 
A- 
 
 
27,056
 
 
 
10,639
 
 
 
-
 
 
 
37,695
 
B+ 
 
 
1,390
 
 
 
-
 
 
 
-
 
 
 
1,390
 
B 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Not rated
 
 
 
42,762
 
 
 
-
 
 
 
151
 
 
 
42,913
 
Total
 
 
$
103,669
 
 
$
10,922
 
 
$
427
 
 
$
115,018
 

Mortgage loans serviced for others are not reported as assets. The principal balances of these loans at year end are as follows:

 
 
2012
 
 
2011
 
 
 
(In thousands)
 
Mortgage loans serviced for :
 
 
 
 
 
 
Fannie Mae
 
$
948,588
 
 
$
895,510
 
Freddie Mac
 
 
805,447
 
 
 
882,401
 
Other
 
 
123
 
 
 
154
 
Total
 
$
1,754,158
 
 
$
1,778,065
 

Custodial escrow balances maintained in connection with mortgage loans serviced for others totaled $31.2 million and $26.5 million, at December 31, 2012 and 2011, respectively.

If we do not remain "Well Capitalized" (see note #21), meet certain minimum capital levels or certain profitability requirements or if we incur a rapid decline in net worth we could lose our ability to sell and/or service loans to these investors. This could impact our ability to generate gains on the sale of loans and generate servicing income. A forced liquidation of our servicing portfolio could also impact the value that could be recovered on this asset. Fannie Mae has the most stringent eligibility requirements covering capital levels, profitability and decline in net worth. Fannie Mae requires seller/servicers to be "Well Capitalized." For the profitability requirement, we cannot record four or more consecutive quarterly losses and experience a 30% decline in net worth over the same period. Finally, our net worth cannot decline by more than 25% in one quarter or more than 40% over two consecutive quarters. The highest level of capital we are required to maintain is at least $2.5 million plus 0.25% of loans serviced for Freddie Mac.
 
An analysis of capitalized mortgage loan servicing rights for the years ended December 31 follows:

 
 
2012
 
 
2011
 
 
2010
 
 
 
(In thousands)
 
Balance at beginning of year
 
$
11,229
 
 
$
14,661
 
 
$
15,273
 
Originated servicing rights capitalized
 
 
4,006
 
 
 
2,967
 
 
 
4,158
 
Amortization
 
 
(4,679
)
 
 
(3,065
)
 
 
(3,862
)
Change in valuation allowance
 
 
457
 
 
 
(3,334
)
 
 
(908
)
Balance at end of year
 
$
11,013
 
 
$
11,229
 
 
$
14,661
 
Valuation allowance
 
$
6,087
 
 
$
6,544
 
 
$
3,210
 
Loans sold and serviced that have had servicing rights capitalized
 
$
1,751,960
 
 
$
1,774,952
 
 
$
1,764,317
 

The fair value of capitalized mortgage loan servicing rights was $11.4 million and $11.5 million at December 31, 2012 and 2011, respectively. Fair value was determined using an average coupon rate of 4.81%, average servicing fee of 0.254%, average discount rate of 11.02% and an average PSA rate of 250 for December 31, 2012; and an average coupon rate of 5.20%, average servicing fee of 0.256%, average discount rate of 10.65% and an average PSA rate of 278 for December 31, 2011.