ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY

6 Months Ended

Jun. 30, 2013

Loans [Abstract]

ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY

NOTE 4. ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY

The following table presents the activity in the allowance for loan losses by portfolio segment for the three-month and six-month periods ended June 30, 2013, and the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2013:

				Commercial
				Real Estate								Consumer
	Commercial			and Multifamily			Agri-business			Other		1-4 Family			Other
	and Industrial			Residential			and Agricultural			Commercial		Mortgage			Consumer			Unallocated		Total
Three Months Ended June 30, 2013
Balance April 1,	$	22,113		$	20,420		$	1,263		$	223	$	2,866		$	558		$	3,375	$	50,818
Provision for loan losses		(348	)		(336	)		452			41		30			69			92		0
Loans charged-off		(10	)		0			(200	)		0		(81	)		(78	)		0		(369	)
Recoveries		124			14			2			0		8			38			0		186
Net loans charged-off		114			14			(198	)		0		(73	)		(40	)		0		(183	)
Balance June 30,	$	21,879		$	20,098		$	1,517		$	264	$	2,823		$	587		$	3,467	$	50,635
Six Months Ended June 30, 2013
Balance January 1,	$	22,342		$	20,812		$	1,403		$	240	$	2,682		$	609		$	3,357	$	51,445
Provision for loan losses		(707	)		(83	)		310			24		300			46			110		0
Loans charged-off		(143	)		(906	)		(200	)		0		(189	)		(137	)		0		(1,575	)
Recoveries		387			275			4			0		30			69			0		765
Net loans charged-off		244			(631	)		(196	)		0		(159	)		(68	)		0		(810	)
Balance June 30,	$	21,879		$	20,098		$	1,517		$	264	$	2,823		$	587		$	3,467	$	50,635
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4,469		$	6,103		$	40		$	0	$	445		$	28		$	0	$	11,085
Collectively evaluated for impairment		17,410			13,995			1,477			264		2,378			559			3,467		39,550
Total ending allowance balance	$	21,879		$	20,098		$	1,517		$	264	$	2,823		$	587		$	3,467	$	50,635
Loans:
Loans individually evaluated for impairment	$	16,882		$	26,540		$	757		$	0	$	2,654		$	80		$	0	$	46,913
Loans collectively evaluated for impairment		871,458			857,114			197,643			46,499		271,730			43,343			0		2,287,787
Total ending loans balance	$	888,340		$	883,654		$	198,400		$	46,499	$	274,384		$	43,423		$	0	$	2,334,700

The recorded investment in loans does not include accrued interest.

                The following table presents the activity in the allowance for loan losses by portfolio segment for the three-month and six-month periods ended June 30, 2012:

				Commercial
				Real Estate								Consumer
	Commercial			and Multifamily			Agri-business		Other			1-4 Family			Other
	and Industrial			Residential			and Agricultural		Commercial			Mortgage			Consumer			Unallocated			Total
Three Months Ended June 30, 2012
Balance April 1,	$	22,134		$	23,236		$	538	$	186		$	2,527		$	523		$	3,613		$	52,757
Provision for loan losses		(1,048	)		829			881		(12	)		(110	)		65			(105	)		500
Loans charged-off		(1,676	)		0			0		0			(78	)		(97	)		0			(1,851	)
Recoveries		286			18			0		2			73			32			0			411
Net loans charged-off		(1,390	)		18			0		2			(5	)		(65	)		0			(1,440	)
Balance June 30,	$	19,696		$	24,083		$	1,419	$	176		$	2,412		$	523		$	3,508		$	51,817
Six Months Ended June 30, 2012
Balance January 1,	$	22,830		$	23,489		$	695	$	65		$	2,322		$	645		$	3,354		$	53,400
Provision for loan losses		(1,152	)		1,394			724		107			61			11			154			1,299
Loans charged-off		(2,454	)		(847	)		0		0			(92	)		(191	)		0			(3,584	)
Recoveries		472			47			0		4			121			58			0			702
Net loans charged-off		(1,982	)		(800	)		0		4			29			(133	)		0			(2,882	)
Balance June 30,	$	19,696		$	24,083		$	1,419	$	176		$	2,412		$	523		$	3,508		$	51,817

The recorded investment in loans does not include accrued interest.

                The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2012:

			Commercial
			Real Estate						Consumer
	Commercial		and Multifamily		Agri-business		Other		1-4 Family		Other
	and Industrial		Residential		and Agricultural		Commercial		Mortgage		Consumer		Unallocated		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	5,542	$	8,559	$	63	$	0	$	607	$	34	$	0	$	14,805
Collectively evaluated for impairment		16,800		12,253		1,340		240		2,075		575		3,357		36,640
Total ending allowance balance	$	22,342	$	20,812	$	1,403	$	240	$	2,682	$	609	$	3,357	$	51,445
Loans:
Loans individually evaluated for impairment	$	18,281	$	36,919	$	797	$	0	$	2,853	$	92	$	0	$	58,942
Loans collectively evaluated for impairment		828,728		763,279		224,008		56,810		280,141		45,612		0		2,198,578
Total ending loans balance	$	847,009	$	800,198	$	224,805	$	56,810	$	282,994	$	45,704	$	0	$	2,257,520

The recorded investment in loans does not include accrued interest.

The allowance for loan losses to total loans at June 30, 2013 and 2012 was 2.17% and 2.34%, respectively. The allowance for loan losses to total loans at December 31, 2012 was 2.28%.

The following table presents loans individually evaluated for impairment by class of loans as of and for the three-month and six-month periods ended June 30, 2013:

							Three Months Ended June 30, 2013							Six Months Ended June 30, 2013
											Cash Basis							Cash Basis
	Unpaid				Allowance for		Average		Interest		Interest			Average		Interest		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Income			Recorded		Income		Income
	Balance		Investment		Allocated		Investment		Recognized		Recognized			Investment		Recognized		Recognized
With no related allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans	$	65	$	65	$	0	$	65	$	0	$	0		$	65	$	0	$	0
Non-working capital loans		0		0		0		0		0		0			17		0		0
Commercial real estate and multi-family residential loans:
Owner occupied loans		716		536		0		543		0		0			555		0		0
Agri-business and agricultural loans:
Loans secured by farmland		612		434		0		440		0		0			481		0		0
Consumer 1-4 family loans:
Closed end first mortgage loans		49		49		0		49		0		0			54		0		0
Open end and junior lien loans		0		0		0		0		0		0			21		0		0
Other consumer loans		1		1		0		1		0		0			1		0		0
With an allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans		5,492		2,883		1,123		2,898		14		14			3,034		27		27
Non-working capital loans		15,789		13,934		3,346		13,815		136		139			14,114		271		276
Commercial real estate and multi-family residential loans:
Construction and land development loans		3,459		3,070		653		4,203		7		(5	)		4,366		52		47
Owner occupied loans		3,629		3,629		715		2,768		39		45			3,534		68		76
Nonowner occupied loans		19,296		19,305		4,735		19,399		84		85			21,849		168		172
Multifamily loans		0		0		0		0		0		0			96		0		0
Agri-business and agricultural loans:
Loans secured by farmland		644		323		40		391		0		0			359		0		0
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		3,570		2,571		436		2,537		23		18			2,518		23		37
Open end and junior lien loans		34		34		9		58		0		0			49		0		0
Other consumer loans		79		79		28		79		1		1			80		1		1
Total	$	53,435	$	46,913	$	11,085	$	47,246	$	304	$	297		$	51,193	$	610	$	636

The recorded investment in loans does not include accrued interest.

The following table presents loans individually evaluated for impairment by class of loans as of and for the three-month and six-month periods ended June 30, 2012:

							Three Months Ended June 30, 2012						Six Months Ended June 30, 2012
											Cash Basis						Cash Basis
	Unpaid				Allowance for		Average		Interest		Interest		Average		Interest		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Income		Recorded		Income		Income
	Balance		Investment		Allocated		Investment		Recognized		Recognized		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial and industrial loans:
Non-working capital loans	$	505	$	166	$	0	$	168	$	0	$	0	$	170	$	0	$	0
Commercial real estate and multi-family residential loans:
Owner occupied loans		654		629		0		637		0		0		464		0		0
Nonowner occupied loans		391		391		0		265		0		0		133		0		0
Agri-business and agricultural loans:
Loans secured by farmland		443		265		0		266		0		0		133		0		0
Loans for ag production		203		203		0		204		0		0		102		0		0
Consumer 1-4 family loans:
Closed end first mortgage loans		580		580		0		583		0		0		440		0		0
Open end and junior lien loans		20		20		0		20		0		0		30		0		0
With an allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans		5,598		2,989		1,450		4,395		13		13		5,100		29		28
Non-working capital loans		17,954		17,265		5,271		17,264		177		178		17,494		357		360
Commercial real estate and multi-family residential loans:
Construction and land development loans		2,386		1,996		510		2,036		17		17		1,503		17		17
Owner occupied loans		5,405		4,636		1,500		4,288		6		6		4,438		18		16
Nonowner occupied loans		28,184		27,582		6,936		27,561		104		105		28,481		202		204
Multifamily loans		0		0		0		0		0		0		0		0		0
Agri-business and agricultural loans:
Loans secured by farmland		1,735		341		75		345		0		0		484		0		0
Loans for agricultural production		0		0		0		0		0		0		105		0		0
Other commercial loans		0		0		0		0		0		0		0		0		0
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		1,875		1,877		312		1,833		9		11		1,815		20		22
Open end and junior lien loans		310		310		169		312		0		0		333		0		0
Residential construction loans		0		0		0		0		0		0		0		0		0
Other consumer loans		6		6		5		6		0		0		7		0		0
Total	$	66,249	$	59,256	$	16,228	$	59,378	$	326	$	330	$	60,596	$	643	$	647

The recorded investment in loans does not include accrued interest.

                The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2012:

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance		Investment		Allocated
With no related allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans	$	61	$	61	$	0
Non-working capital loans		0		0		0
Commercial real estate and multi-family residential loans:
Construction and land development loans
Owner occupied loans		754		574		0
Nonowner occupied loans		385		385		0
Multifamily loans		410		286		0
Agri-business and agricultural loans:
Loans secured by farmland		645		466		0
Loans for ag production		0		0		0
Other commercial loans		0		0		0
Consumer 1-4 family loans:
Closed end first mortgage loans		59		59		0
Open end and junior lien loans		41		41		0
Residential construction loans
Other consumer loans		1		1		0
With an allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans		5,833		3,224		1,516
Non-working capital loans		16,763		14,996		4,026
Commercial real estate and multi-family residential loans:
Construction and land development loans		3,352		2,960		934
Owner occupied loans		5,869		5,869		1,476
Nonowner occupied loans		26,835		26,845		6,149
Multifamily loans		0		0		0
Agri-business and agricultural loans:
Loans secured by farmland		651		331		63
Loans for agricultural production		0		0		0
Other commercial loans		0		0		0
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		3,387		2,403		415
Open end and junior lien loans		379		350		192
Residential construction loans		0		0		0
Other consumer loans		91		91		34
Total	$	65,516	$	58,942	$	14,805

The recorded investment in loans does not include accrued interest.

                The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of June 30, 2013 and December 31, 2012:

	June 30, 2013				December 31, 2012
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			Still				Still
	Nonaccrual		Accruing		Nonaccrual		Accruing
Commercial and industrial loans:
Working capital lines of credit loans	$	1,812	$	0	$	1,899	$	0
Non-working capital loans		3,786		104		4,812		50
Commercial real estate and multi-family residential loans:
Construction and land development loans		383		0		398		0
Owner occupied loans		2,424		0		2,461		0
Nonowner occupied loans		11,718		0		19,200		0
Multifamily loans		0		0		286		0
Agri-business and agricultural loans:
Loans secured by farmland		757		0		797		0
Loans for agricultural production		0		0		0		0
Other commercial loans		0		0		0		0
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		560		0		504		0
Open end and junior lien loans		34		0		391		0
Residential construction loans		0		0		0		0
Other consumer loans		65		0		77		0
Total	$	21,539	$	104	$	30,825	$	50

The recorded investment in loans does not include accrued interest.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2013 by class of loans:

	30-89		Greater than
	Days		90 Days		Total		Loans Not
	Past Due		Past Due		Past Due		Past Due		Total
Commercial and industrial loans:
Working capital lines of credit loans	$	642	$	1,812	$	2,454	$	459,931	$	462,385
Non-working capital loans		343		3,890		4,233		421,722		425,955
Commercial real estate and multi-family residential loans:
Construction and land development loans		0		383		383		107,907		108,290
Owner occupied loans		126		2,424		2,550		362,287		364,837
Nonowner occupied loans		1,406		11,718		13,124		360,038		373,162
Multifamily loans		0		0		0		37,365		37,365
Agri-business and agricultural loans:
Loans secured by farmland		0		757		757		99,818		100,575
Loans for agricultural production		18		0		18		97,807		97,825
Other commercial loans		0		0		0		46,499		46,499
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		2,399		560		2,959		113,031		115,990
Open end and junior lien loans		248		34		282		152,859		153,141
Residential construction loans		8		0		8		5,245		5,253
Other consumer loans		165		65		230		43,193		43,423
Total	$	5,355	$	21,643	$	26,998	$	2,307,702	$	2,334,700

The recorded investment in loans does not include accrued interest.

               The following table presents the aging of the recorded investment in past due loans as of December 31, 2012 by class of loans:

	30-89		Greater than
	Days		90 Days		Total		Loans Not
	Past Due		Past Due		Past Due		Past Due		Total
Commercial and industrial loans:
Working capital lines of credit loans	$	233	$	1,899	$	2,132	$	437,705	$	439,837
Non-working capital loans		48		4,862		4,910		402,262		407,172
Commercial real estate and multi-family residential loans:
Construction and land development loans		998		398		1,396		80,954		82,350
Owner occupied loans		1,023		2,461		3,484		354,921		358,405
Nonowner occupied loans		38		19,200		19,238		295,243		314,481
Multifamily loans		0		286		286		44,676		44,962
Agri-business and agricultural loans:
Loans secured by farmland		0		797		797		108,359		109,156
Loans for agricultural production		0		0		0		115,649		115,649
Other commercial loans		0		0		0		56,810		56,810
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		1,475		504		1,979		107,583		109,562
Open end and junior lien loans		361		391		752		161,172		161,924
Residential construction loans		0		0		0		11,508		11,508
Other consumer loans		81		77		158		45,546		45,704
Total	$	4,257	$	30,875	$	35,132	$	2,222,388	$	2,257,520

The recorded investment in loans does not include accrued interest.

Troubled Debt Restructurings:

Troubled debt restructured loans are included in the totals for impaired loans. The Company has allocated $10.2 million and $12.5 million of specific reserves to loans whose terms have been modified in troubled debt restructurings as of June 30, 2013 and December 31, 2012. The Company is not committed to lending additional funds to customers whose loans have been modified in a troubled debt restructuring.

	June 30,		December 31,
	2013		2012
Accruing troubled debt restructured loans	$	23,017	$	22,332
Nonaccrual troubled debt restructured loans		19,398		28,506
Total troubled debt restructured loans	$	42,415	$	50,838

During the quarter ending June 30, 2013, loans totaling $328,000 were modified as troubled debt restructured loans. Concessions granted during the modifications included reduction in the interest rates to rates that would not be readily available in the marketplace for borrowers with a similar risk profile and/or capitalizing past due interest and other expenses into the principal balance of the loan. The troubled debt restructured loans during the quarter were all granted to consumer mortgage borrowers.

During the quarter ending March 31, 2013, loans totaling $2.2 million were modified as troubled debt restructurings. The modified terms of the loans included reductions in the interest rates to one that would not be readily available in the marketplace for borrowers with a similar risk profile and modifications of the repayment terms. These restructured loans were provided to related borrowers who are engaged in land development.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three-month and six-month periods ending June 30, 2013:

	Modifications
	Three Months Ended June 30, 2013
	All Modifications
			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Loans		Investment		Investment
Troubled Debt Restructurings
Consumer 1-4 family loans:
Closed end first mortgage loans		4	$	317	$	328
Total		4	$	317	$	328

	Interest Rate Reductions						Principal and Interest Forgiveness										Modified Repayment Terms
			Interest at		Interest at								Interest at		Interest at				Extension
	Number of		Pre-Modification		Post-Modification		Number of		Principal at		Principal at		Pre-Modification		Post-Modification		Number of		Period or
	Loans		Rate		Rate		Loans		Pre-Modification		Post-Modification		Rate		Rate		Loans		Range
																			(in months)
Troubled Debt Restructurings
Consumer 1-4 family loans:
Closed end first mortgage loans		2	$	142	$	158		2	$	156	$	161	$	164	$	149		0		0
Total		2	$	142	$	158		2	$	156	$	161	$	164	$	149		0		0

	Modifications
	Six Months Ended June 30, 2013
	All Modifications
			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Loans		Investment		Investment
Troubled Debt Restructurings
Commercial real estate and multi-family residential loans:
Construction and land development loans		6	$	2,198	$	2,198
Consumer 1-4 family loans:
Closed end first mortgage loans		4		317		328
Total		10	$	2,515	$	2,526

	Interest Rate Reductions						Principal and Interest Forgiveness										Modified Repayment Terms
			Interest at		Interest at								Interest at		Interest at				Extension
	Number of		Pre-Modification		Post-Modification		Number of		Principal at		Principal at		Pre-Modification		Post-Modification		Number of		Period or
	Loans		Rate		Rate		Loans		Pre-Modification		Post-Modification		Rate		Rate		Loans		Range
																			(in months)
Troubled Debt Restructurings
Commercial real estate and multi-family residential loans:
Construction and land development loans		6	$	85	$	63		0	$	0	$	0	$	0	$	0		0		0
Consumer 1-4 family loans:
Closed end first mortgage loans		2		142		158		2		156		161		164		149		0		0
Total		8	$	227	$	221		2	$	156	$	161	$	164	$	149		0		0

For the three-month period ending June 30, 2013 the commercial real estate and multi-family residential loan troubled debt restructuring described above decreased the allowance for loan losses by $86,000 and the consumer 1-4 family loan troubled debt restructurings described above increased the allowance for loan losses by $42,000.

For the six-month period ending June 30, 2012, the commercial real estate and multi-family residential loan troubled debt restructurings described above decreased the allowance for loan losses by $373,000 and the consumer 1-4 family loan troubled debt restructurings described above increased the allowance for loan losses by $65,000.

The troubled debt restructurings described above had charge-offs of $0 and $365,000, respectively, during the three-month and six-month periods ending June 30, 2013.

The following table presents loans by class modified as troubled debt restructurings that occurred during the six-month and three-month periods ending June 30, 2012:

	Modifications
	Six Months Ended June 30, 2012
	All Modifications Classified as Troubled Debt Restructurings
			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Loans		Investment		Investment
Troubled Debt Restructurings
Commercial and industrial loans:
Non-working capital loans		1	$	942	$	1,060
Commercial real estate and multi-family residential loans:
Construction and land development loans		5		1,638		1,638
Owner occupied loans		1		849		849
Nonowner occupied loans		1		385		385
Consumer 1-4 family loans:
Closed end first mortgage loans		1		39		39
Total		9	$	3,853	$	3,971

	Interest Rate Reductions						Principal and Interest Forgiveness										Modified Repayment Terms
			Interest at		Interest at								Interest at		Interest at				Extension
	Number of		Pre-Modification		Post-Modification		Number of		Principal at		Principal at		Pre-Modification		Post-Modification		Number of		Period or
	Loans		Rate		Rate		Loans		Pre-Modification		Post-Modification		Rate		Rate		Loans		Range
																			(in months)
Troubled Debt Restructurings
Commercial and industrial loans:
Non-working capital loans		0	$	0	$	0		0	$	0	$	0	$	0	$	0		0		0
Commercial real estate and multi-family residential loans:
Construction and land development loans		0		0		0		0		0		0		0		0		0		0
Owner occupied loans		1		440		117		0		0		0		0		0		0		0
Nonowner occupied loans		0		0		0		0		0		0		0		0		1		14
Consumer 1-4 family loans:
Closed end first mortgage loans		1		76		15		0		0		0		0		0		0		0
Total		2	$	516	$	132		0	$	0	$	0	$	0	$	0		1		14

	Modifications
	Three Months Ended June 30, 2012
	All Modifications Classified as Troubled Debt Restructurings
			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Loans		Investment		Investment
Troubled Debt Restructurings
Commercial and industrial loans:
Non-working capital loans		1	$	942	$	1,060
Commercial real estate and multi-family residential loans:
Owner occupied loans		1		849		849
Nonowner occupied loans		1		385		385
Consumer 1-4 family loans:
Closed end first mortgage loans		1		39		39
Total		4	$	2,215	$	2,333

	Interest Rate Reductions						Principal and Interest Forgiveness										Modified Repayment Terms
			Interest at		Interest at								Interest at		Interest at				Extension
	Number of		Pre-Modification		Post-Modification		Number of		Principal at		Principal at		Pre-Modification		Post-Modification		Number of		Period or
	Loans		Rate		Rate		Loans		Pre-Modification		Post-Modification		Rate		Rate		Loans		Range
																			(in months)
Troubled Debt Restructurings
Commercial and industrial loans:
Non-working capital loans		0	$	0	$	0		0	$	0	$	0	$	0	$	0		0		0
Commercial real estate and multi-family residential loans:		0		0		0		0		0		0		0		0		0		0
Owner occupied loans		1		440		117		0		0		0		0		0		0		0
Nonowner occupied loans		0		0		0		0		0		0		0		0		1		14
Consumer 1-4 family loans:
Closed end first mortgage loans		1		76		15		0		0		0		0		0		0		0
Total		2	$	516	$	132		0	$	0	$	0	$	0	$	0		1		14

For the three month period ending June 30, 2012, the commercial and industrial troubled debt restructured loans described above increased the allowance for loan losses by $690,000, the commercial real estate and multi-family residential loan troubled debt restructurings described above increased the allowance for loan losses by $290,000 and the consumer 1-4 family loan troubled debt restructurings described above increased the allowance for loan losses by $6,000. For the six-month period ending June 30, 2012, the commercial and industrial troubled debt restructured loans described above increased the allowance for loan losses by $690,000, the commercial real estate and multi-family residential troubled debt restructured loans described above increased the allowance for loan losses by $790,000 and the consumer 1-4 family loan troubled debt restructurings described above increased the allowance for loan losses by $6,000.

No charge offs resulted from any troubled debt restructurings described above during the three and six month periods ending June 30, 2012.

 The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification which occurred during the three month and six month periods ending June 30, 2013:

	Modifications
	Three Months Ended June 30, 2013				Six Months Ended June 30, 2013
	Number of		Recorded		Number of		Recorded
	Loans		Investment		Loans		Investment
Troubled Debt Restructurings that Subsequently Defaulted
Consumer 1-4 family loans:
Closed end first mortgage loans		0	$	0		1	$	946
Total		0	$	0		1	$	946

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

The troubled debt restructurings described above that subsequently defaulted made a large principal payment during the second quarter of 2013, which decreased the allowance for loan losses by $80,000 and did not result in any charge offs during the three and six month periods ending June 30, 2013.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification which occurred during the three month and six month periods ending June 30, 2012:

	Number of		Recorded
	Loans		Investment
Troubled Debt Restructurings that Subsequently Defaulted
Consumer 1-4 family loans:
Closed end first mortgage loans		1	$	65
Total		1	$	65

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $1,000 and did not result in any charge offs during the three and six month periods ending June 30, 2012.

Credit Quality Indicators:

The Company 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 Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis for Special Mention, Substandard and Doubtful grade loans and annually on Pass grade loans over $250,000.

The Company 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 paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

                Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans with the exception of consumer troubled debt restructurings, which are evaluated and listed with Substandard commercial grade loans. Loans listed as Not Rated are consumer loans included in groups of homogenous loans which are analyzed for credit quality indicators utilizing delinquency status. As of June 30, 2013 and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial and industrial loans:
Working capital lines of credit loans	$	424,540	$	23,755	$	14,090	$	0	$	0
Non-working capital loans		378,380		22,086		25,425		64		0
Commercial real estate and multi-family residential loans:
Construction and land development loans		94,229		4,140		9,921		0		0
Owner occupied loans		325,524		22,302		17,011		0		0
Nonowner occupied loans		339,563		14,652		18,947		0		0
Multifamily loans		37,028		337		0		0		0
Agri-business and agricultural loans:
Loans secured by farmland		99,229		0		1,346		0		0
Loans for agricultural production		97,825		0		0		0		0
Other commercial loans		46,381		0		118		0		0
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		23,717		847		1,816		0		89,610
Open end and junior lien loans		5,820		2,124		0		0		145,197
Residential construction loans		0		0		0		0		5,253
Other consumer loans		8,261		460		293		0		34,409
Total	$	1,880,497	$	90,703	$	88,967	$	64	$	274,469

The recorded investment in loans does not include accrued interest.

                 Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans with the exception of consumer troubled debt restructurings which are evaluated and listed with Substandard commercial grade loans. Loans listed as Not Rated are consumer loans included in groups of homogenous loans which are analyzed for credit quality indicators utilizing delinquency status. As of December 31, 2012 and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
					(in thousands)
Commercial and industrial loans:
Working capital lines of credit loans	$	403,778	$	22,591	$	13,468	$	0	$	0
Non-working capital loans		355,772		23,192		26,857		66		1,285
Commercial real estate and multi-family residential loans:
Construction and land development loans		67,002		4,595		10,753		0		0
Owner occupied loans		315,672		24,589		18,144		0		0
Nonowner occupied loans		282,108		6,345		26,028		0		0
Multifamily loans		43,425		345		1,192		0		0
Agri-business and agricultural loans:
Loans secured by farmland		107,734		0		1,404		0		18
Loans for agricultural production		115,649		0		0		0		0
Other commercial loans		56,692		0		118		0		0
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		18,685		343		729		0		89,805
Open end and junior lien loans		7,932		300		0		0		153,692
Residential construction loans		0		0		0		0		11,508
Other consumer loans		10,168		378		497		0		34,661
Total	$	1,784,617	$	82,678	$	99,190	$	66	$	290,969

The recorded investment in loans does not include accrued interest.