Allowance for Loan Losses

The following table presents the activity of the allowance for loan losses by portfolio segment for the three months

ended September 30.



Allowance for Loan Losses:	September 30, 2013
(Dollar amounts in thousands)	Commercial			Residential			Consumer			Unallocated		Total
Beginning balance	$	14,531		$	1,592		$	3,637		$	2,373	$	22,133
Provision for loan losses*	(486		)	(266		)	504			548		300
Loans charged -off	(388		)	(284		)	(840		)	—		(1,512		)
Recoveries	361			398			324			—		1,083
Ending Balance	$	14,018		$	1,440		$	3,625		$	2,921	$	22,004

* Provision before increase of $195 thousand in 2013for decrease in FDIC indemnification asset



Allowance for Loan Losses:	September 30, 2012
(Dollar amounts in thousands)	Commercial			Residential			Consumer			Unallocated		Total
Beginning balance	$	13,190		$	2,124		$	3,744		$	1,034	$	20,092
Provision for loan losses*	765			1,594			196			85		2,640
Loans charged -off	(715		)	(381		)	(779		)	—		(1,875		)
Recoveries	167			36			397			—		600
Ending Balance	$	13,407		$	3,373		$	3,558		$	1,119	$	21,457

* Provision before decrease of $81 thousand in 2012 for increase in FDIC indemnification asset

The following table presents the activity of the allowance for loan losses by portfolio segment for the nine months ended September30.



Allowance for Loan Losses:	September 30, 2013
(Dollar amounts in thousands)	Commercial			Residential			Consumer			Unallocated		Total
Beginning balance	$	10,987		$	5,426		$	3,879		$	1,666	$	21,958
Provision for loan losses*	2,438			234			1,348			1,255		5,275
Loans charged -off	(2,273		)	(4,683		)	(2,677		)	—		(9,633		)
Recoveries	2,866			463			1,075			—		4,404
Ending Balance	$	14,018		$	1,440		$	3,625		$	2,921	$	22,004

* Provision before increase of $1.2 million in 2013 for decrease in FDIC indemnification asset



Allowance for Loan Losses:	September 30, 2012
(Dollar amounts in thousands)	Commercial			Residential			Consumer			Unallocated		Total
Beginning balance	$	12,119		$	2,728		$	3,889		$	505	$	19,241
Provision for loan losses*	3,642			2,859			1,185			614		8,300
Loans charged -off	(2,917		)	(2,289		)	(2,635		)	—		(7,841		)
Recoveries	563			75			1,119			—		1,757
Ending Balance	$	13,407		$	3,373		$	3,558		$	1,119	$	21,457

* Provision before decrease of $1.0 million in 2012 for increase in FDIC indemnification asset

The following table presents the allocation of the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method at September 30, 2013 and December 31, 2012.



Allowance for Loan Losses	September 30, 2013
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Individually evaluated for impairment	$	5,510	$	—	$	—	$	—	$	5,510
Collectively evaluated for impairment	7,698		1,254		3,625		2,921		15,498
Acquired with deteriorated credit quality	810		186		—		—		996
Ending Balance	$	14,018	$	1,440	$	3,625	$	2,921	$	22,004



Loans:	September 30, 2013
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Total
Individually evaluated for impairment	$	24,741	$	226	$	—	$	24,967
Collectively evaluated for impairment	1,028,446		481,064		270,518		1,780,028
Acquired with deteriorated credit quality	10,142		2,736		—		12,878
Ending Balance	$	1,063,329	$	484,026	$	270,518	$	1,817,873



Allowance for Loan Losses:	December 31, 2012
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Individually evaluated for impairment	3,453		3,920		—		—		7,373
Collectively evaluated for impairment	7,286		1,506		3,879		1,666		14,337
Acquired with deteriorated credit quality	248		—		—		—		248
Ending Balance	$	10,987	$	5,426	$	3,879	$	1,666	$	21,958



Loans	December 31, 2012
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Total
Individually evaluated for impairment	23,721		6,973		—		30,694
Collectively evaluated for impairment	1,056,861		487,486		269,882		1,814,229
Acquired with deteriorated credit quality	13,582		3,421		6		17,009
Ending Balance	$	1,094,164	$	497,880	$	269,888	$	1,861,932

The following tables present loans individually evaluated for impairment by class of loans.



					September 30, 2013
	Unpaid Principal		Recorded		Allowance for Loan Losses		Average Recorded		Interest Income		Cash Basis Interest
(Dollar amounts in thousands)	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial
Commercial & Industrial	$	3,725	$	3,527	$	—	$	1,464	$	—	$	—
Farmland	—		—		—		—		—		—
Non Farm, Non Residential	24		24		—		6		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	—		—		—		—		—		—
Residential
First Liens	—		—		—		9		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		—		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
With an allowance recorded:
Commercial
Commercial & Industrial	10,789		10,789		3,353		14,131		—		—
Farmland	—		—		—		446		—		—
Non Farm, Non Residential	8,063		7,997		1,361		8,100		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	4,107		4,107		896		3,458		—		—
Residential
First Liens	38		38		—		646		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		2,770		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
TOTAL	$	26,746	$	26,482	$	5,610	$	31,030	$	—	$	—



					December 31, 2012
	Unpaid Principal		Recorded		Allowance for Loan Losses		Average Recorded		Interest Income		Cash Basis Interest Income
(Dollar amounts in thousands)	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial
Commercial & Industrial	$	—	$	—	$	—	$	1,013	$	—	$	—
Farmland	—		—		—		—		—		—
Non Farm, Non Residential	—		—		—		1,679		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	—		—		—		—		—		—
Residential
First Liens	—		—		—		150		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		50		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
With an allowance recorded:
Commercial
Commercial & Industrial	17,262		17,098		3,153		16,738		—		—
Farmland	891		891		191		891		—		—
Non Farm, Non Residential	7,438		7,386		293		5,000		179		—
Agriculture	—		—		—		—		—		—
All Other Commercial	1,209		1,209		52		1,362		—		—
Residential
First Liens	1,254		1,254		126		1,230		—		—
Home Equity	179		179		—		75		—		—
Junior Liens	—		—		—		176		—		—
Multifamily	5,540		5,540		3,794		2,216		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
TOTAL	$	33,773	$	33,557	$	7,609	$	30,580	$	179	$	—



	Three Months Ended September 30, 2013						Nine Months Ended September 30, 2013
	Average Recorded		Interest Income		Cash Basis Interest Income		Average Recorded		Interest Income		Cash Basis Interest Income
(Dollar amounts in thousands)	Investment		Recognized		Recognized		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial
Commercial & Industrial	$	2,728	$	—	$	—	$	1,464	$	—	$	—
Farmland	—		—		—		—		—		—
Non Farm, Non Residential	12		—		—		6		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	—		—		—		—		—		—
Residential
First Liens	17		—		—		9		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		—		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
With an allowance recorded:
Commercial
Commercial & Industrial	11,627		—		—		14,131		—		—
Farmland	—		—		—		446		—		—
Non Farm, Non Residential	8,185		—		—		8,100		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	4,148		—		—		3,458		—		—
Residential
First Liens	39		—		—		646		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		2,770		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
TOTAL	$	26,756	$	—	$	—	$	31,030	$	—	$	—



	Three Months Ended September 30, 2012						Nine Months Ended September 30, 2012
	Average Recorded		Interest Income		Cash Basis Interest Income		Average Recorded		Interest Income		Cash Basis Interest Income
(Dollar amounts in thousands)	Investment		Recognized		Recognized		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial
Commercial & Industrial	$	2,531	$	—	$	—	$	1,266	$	—	$	—
Farmland	—		—		—		—		—		—
Non Farm, Non Residential	987		—		—		2,098		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	—		—		—		—		—		—
Residential
First Liens	—		—		—		188		—		—
Home Equity	—		—		—		—		—		—
Junior Liens	—		—		—		—		—		—
Multifamily	—		—		—		62		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
With an allowance recorded:
Commercial
Commercial & Industrial	15,427		—		—		16,648		—		—
Farmland	891		—		—		891		—		—
Non Farm, Non Residential	5,045		—		—		4,404		—		—
Agriculture	—		—		—		—		—		—
All Other Commercial	1,313		—		—		1,400		—		—
Residential
First Liens	1,234		—		—		1,224		—		—
Home Equity	99		—		—		49		—		—
Junior Liens	—		—		—		220		—		—
Multifamily	2,770		—		—		1,385		—		—
All Other Residential	—		—		—		—		—		—
Consumer
Motor Vehicle	—		—		—		—		—		—
All Other Consumer	—		—		—		—		—		—
TOTAL	$	30,297	$	—	$	—	$	29,835	$	—	$	—

The table below presents the recorded investment in non-performing loans.



	September 30, 2013
	Loans Past Due Over 90 Day Still		Troubled Debt
(Dollar amounts in thousands)	Accruing		Restructurings		Nonaccrual
Commercial
Commercial & Industrial	$	10	$	10,083	$	5,061
Farmland	—		—		179
Non Farm, Non Residential	37		6,215		5,189
Agriculture	—		—		116
All Other Commercial	—		—		4,165
Residential
First Liens	747		4,276		4,414
Home Equity	22		—		188
Junior Liens	147		—		547
Multifamily	—		—		452
All Other Residential	—		—		135
Consumer
Motor Vehicle	172		626		186
All Other Consumer	4		17		1,168
TOTAL	$	1,139	$	21,217	$	21,800



	December 31, 2012
	Loans Past Due Over 90 Day Still		Troubled Debt
(Dollar amounts in thousands)	Accruing		Restructurings		Nonaccrual
Commercial
Commercial & Industrial	$	724	$	11,573	$	9,360
Farmland	231		—		907
Non Farm, Non Residential	491		4,836		6,718
Agriculture	69		—		104
All Other Commercial	—		—		4,811
Residential
First Liens	1,237		4,126		6,852
Home Equity	24		—		196
Junior Liens	538		—		405
Multifamily	101		—		5,598
All Other Residential	—		—		150
Consumer
Motor Vehicle	133		685		174
All Other Consumer	3		16		1,519
TOTAL	$	3,551	$	21,236	$	36,794

Loans covered by loss share agreements with the FDIC included in loans past due over 90 days still on accrual are $76 thousand at September 30, 2013 and $630 thousand at December 31, 2012. Covered loans included in non-accrual loans are $2.7 million at September 30, 2013 and $4.3 million at December 31, 2012. Covered loans of $1.7 million at September 30, 2013 and $2.9 million at December 31, 2012 are deemed impaired and have allowance for loan loss allocated to them of $100 thousand and $236 thousand, respectively for September 30, 2013 and December 31, 2012. Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in loans by past due category and class of loans.



	September 30, 2013
	30-59 Days		60-89 Days		Greater than 90 days		Total
(Dollar amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Total
Commercial
Commercial & Industrial	$	1,863	$	1,096	$	10,830	$	13,789	$	466,057	$	479,846
Farmland	58		—		123		181		85,479		85,660
Non Farm, Non Residential	204		464		3,080		3,748		255,676		259,424
Agriculture	280		—		1		281		129,151		129,432
All Other Commercial	260		102		—		362		108,605		108,967
Residential
First Liens	1,701		1,563		1,889		5,153		331,226		336,379
Home Equity	177		9		22		208		42,288		42,496
Junior Liens	248		57		659		964		32,864		33,828
Multifamily	20		—		404		424		60,584		61,008
All Other Residential	—		26		—		26		10,289		10,315
Consumer
Motor Vehicle	3,250		474		189		3,913		244,281		248,194
All Other Consumer	152		9		4		165		22,159		22,324
TOTAL	$	8,213	$	3,800	$	17,201	$	29,214	$	1,788,659	$	1,817,873



	December 31, 2012
	30-59 Days		60-89 Days		Greater than 90 days		Total
(Dollar amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Total
Commercial
Commercial & Industrial	$	1,315	$	861	$	3,616	$	5,792	$	487,160	$	492,952
Farmland	534		—		1,122		1,656		87,270		88,926
Non Farm, Non Residential	5,618		1,004		2,449		9,071		290,023		299,094
Agriculture	137		—		78		215		130,404		130,619
All Other Commercial	568		202		350		1,120		81,453		82,573
Residential
First Liens	8,359		1,659		4,599		14,617		336,230		350,847
Home Equity	143		15		24		182		43,317		43,499
Junior Liens	555		98		586		1,239		36,535		37,774
Multifamily	52		—		5,641		5,693		49,019		54,712
All Other Residential	214		—		—		214		10,834		11,048
Consumer
Motor Vehicle	4,164		600		182		4,946		241,303		246,249
All Other Consumer	225		93		3		321		23,318		23,639
TOTAL	$	21,884	$	4,532	$	18,650	$	45,066	$	1,816,866	$	1,861,932

Troubled Debt Restructurings:

The Corporation has allocated $4.1 million and $1.6 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2013 and December 31, 2012. The Corporation has not committed to lend additional amounts as of September 30, 2013 and December 31, 2012 to customers with outstanding loans that are classified as troubled debt restructurings. Modification of the terms of such loans typically include 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. No modification in 2013 or 2012 resulted in permanent reduction of the recorded investment in the loan. There were $1.6 million in modifications that were troubled debt restructurings in the quarter ended September 30, 2013 and $5.1 million for the three months ended September 30, 2012, resulting in no impact to the allowance for loan losses. In the third quarter of 2013 and 2012 there were non farm, non residential loans for $1.5 million and $4.9 million respectively that were collateralized well enough to expect no loss. The remaining loans added were all other consumer loans. There were no loans that defaulted during the nine months ended September 30, 2013 that had been restructured within the past 12 months. There were $15 thousand in loans that defaulted during the three and nine months ended September 30, 2012 that had been restructured within the past 12 months.

Credit Quality Indicators:

The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial loans, with an outstanding balance greater than $100 thousand. Any consumer loans outstanding to a borrower who had commercial loans analyzed will be similarly risk rated. This analysis is performed on a quarterly basis. The Corporation uses the following definitions for risk ratings:

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and debt service capacity of the borrower or of any pledged collateral. These loans have a well-defined weakness or weaknesses which have clearly jeopardized repayment of principal and interest as originally intended. They are characterized by the distinct possibility that the institution will sustain some future loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those graded substandard, with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values.

Furthermore, non-homogeneous loans which were not individually analyzed, but are 90+ days past due or on non-accrual are classified as substandard. Loans included in homogeneous pools, such as residential or consumer may be classified as substandard due to 90+ days delinquency, non-accrual status, bankruptcy, or loan restructuring.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are either less than $100 thousand or are included in groups of homogeneous loans. As of September 30, 2013 and December 31, 2012, and based on the most recent analysis performed, the risk category of loans by class of loans are as follows:



	September 30, 2013
(Dollar amounts in thousands)	Pass		Special Mention		Substandard		Doubtful		Not Rated		Total
Commercial
Commercial & Industrial	$	417,192	$	19,532	$	28,254	$	6,656	$	7,159	$	478,793
Farmland	79,780		3,717		435		—		129		84,061
Non Farm, Non Residential	228,337		8,266		20,812		543		826		258,784
Agriculture	122,541		4,939		80		—		111		127,671
All Other Commercial	93,628		3,639		10,550		47		650		108,514
Residential
First Liens	115,051		4,217		8,274		1,245		206,439		335,226
Home Equity	13,207		370		1,526		113		27,209		42,425
Junior Liens	9,088		39		631		241		23,708		33,707
Multifamily	56,738		2,473		1,568		48		8		60,835
All Other Residential	3,285		—		33		—		6,966		10,284
Consumer
Motor Vehicle	11,752		290		358		9		234,689		247,098
All Other Consumer	3,670		76		64		23		18,351		22,184
TOTAL	$	1,154,269	$	47,558	$	72,585	$	8,925	$	526,245	$	1,809,582



	December 31, 2012
(Dollar amounts in thousands)	Pass		Special Mention		Substandard		Doubtful		Not Rated		Total
Commercial
Commercial & Industrial	$	414,680	$	31,368	$	31,442	$	7,138	$	7,025	$	491,653
Farmland	81,977		2,718		1,616		—		805		87,116
Non Farm, Non Residential	249,614		25,764		22,038		831		42		298,289
Agriculture	119,789		8,921		134		—		62		128,906
All Other Commercial	69,952		132		11,239		54		803		82,180
Residential
First Liens	113,360		8,986		11,516		689		215,034		349,585
Home Equity	13,035		469		1,631		23		28,267		43,425
Junior Liens	10,419		50		515		70		26,575		37,629
Multifamily	42,719		3,328		8,481		59		—		54,587
All Other Residential	2,840		—		35		—		8,136		11,011
Consumer
Motor Vehicle	11,695		262		311		25		232,727		245,020
All Other Consumer	4,614		73		104		21		18,675		23,487
TOTAL	$	1,134,694	$	82,071	$	89,062	$	8,910	$	538,151	$	1,852,888