Loan Quality

6 Months Ended

Jun. 30, 2011

Loan Quality

Loan Quality

Note 7 – Loan Quality

The following table presents, by loan segment, the Allowance for Loan Losses (ALL) for the periods ended:

										Commercial
	Residential Real Estate 1-4 Family									Industrial &			Commercial
				Junior Liens &						Agricultural			Industrial &
(Dollars in thousands)	First Liens			Lines of Credit			Construction			Real Estate			Agricultural			Consumer			Total
ALL at March 31, 2011	$	612		$	292		$	2,342		$	4,216		$	1,447		$	289		$	9,198
Charge-offs		(45	)		(172	)		(337	)		(261	)		(41	)		(50	)		(906	)
Recoveries		17			5			-			47			4			18			91
Provision		(55	)		188			387			642			451			154			1,767
ALL at June 30, 2011	$	529		$	313		$	2,392		$	4,644		$	1,861		$	411		$	10,150
ALL at December 31, 2010	$	600		$	352		$	2,596		$	3,358		$	1,578		$	317		$	8,801
Charge-offs		(152	)		(177	)		(737	)		(422	)		(41	)		(114	)		(1,643	)
Recoveries		28			5			-			240			4			48			325
Provision		53			133			533			1,468			320			160			2,667
ALL at June 30, 2011	$	529		$	313		$	2,392		$	4,644		$	1,861		$	411		$	10,150
ALL at December 31, 2009	$	550		$	278		$	3,087		$	4,175		$	752		$	95		$	8,937
Charge-offs		(107	)		(165	)		(982	)		(1,736	)		(232	)		(452	)		(3,674	)
Recoveries		19			10			53			18			61			142			303
Provision		138			229			438			901			997			532			3,235
ALL at December 31, 2010	$	600		$	352		$	2,596		$	3,358		$	1,578		$	317		$	8,801

The following table presents, by loan segment, loans that were evaluated for the ALL under the specific reserve (individually) and those that were evaluated under the general reserve (collectively) as of June 30, 2011 and December 31, 2010.

							Commercial
	Residential Real Estate 1-4 Family						Industrial &		Commercial
			Junior Liens &				Agricultural		Industrial &
(Dollars in thousands)	First Liens		Lines of Credit		Construction		Real Estate		Agricultural		Consumer		Total
June 30, 2011
Loans evaluated for allowance:
Individually	$	691	$	414	$	12,705	$	21,757	$	1,400	$	-	$	36,967
Collectively		141,580		53,305		52,662		298,967		173,664		14,852		735,030
Total	$	142,271	$	53,719	$	65,367	$	320,724	$	175,064	$	14,852	$	771,997
ALL established for loans evaluated:
Individually	$	202	$	3	$	1,211	$	3,980	$	681	$	-	$	6,077
Collectively		327		310		1,181		664		1,180		411		4,073
ALL at June 30, 2011	$	529	$	313	$	2,392	$	4,644	$	1,861	$	411	$	10,150
December 31, 2010
Loans evaluated for allowance:
Individually	$	965	$	408	$	7,988	$	21,425	$	2,398	$	3	$	33,187
Collectively		143,163		56,286		71,569		282,770		144,274		17,393		715,455
Total	$	144,128	$	56,694	$	79,557	$	304,195	$	146,672	$	17,396	$	748,642
ALL established for loans evaluated:
Individually	$	179	$	4	$	1,566	$	2,170	$	854	$	3	$	4,776
Collectively		421		348		1,030		1,188		724		314		4,025
ALL at December 31, 2010	$	600	$	352	$	2,596	$	3,358	$	1,578	$	317	$	8,801

The following table shows additional information about those loans considered to be impaired at June 30, 2011 and December 31, 2010:

	Impaired Loans
	With No Allowance				With Allowance
(Dollars in thousands)			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal		Related
June 30, 2011	Investment		Balance		Investment		Balance		Allowance
Residential Real Estate 1-4 Family
First liens	$	85	$	153	$	537	$	538	$	202
Junior liens and lines of credit		248		248		166		166		3
Total		333		401		703		704		205
Residential real estate - construction		4,471		4,471		8,111		8,234		1,211
Commercial, industrial and agricultural real estate		377		3,499		18,139		18,258		3,980
Commercial, industrial and agricultural		-		-		1,363		1,400		681
Consumer		-		-		-		-		-
Total	$	5,181	$	8,371	$	28,316	$	28,596	$	6,077
	Impaired Loans
December 31, 2010	With No Allowance				With Allowance
Residential Real Estate 1-4 Family
First liens	$	-	$	-	$	965	$	971	$	179
Junior liens and lines of credit		122		122		286		286		4
Total		122		122		1,251		1,257		183
Residential real estate - construction		3,958		3,958		4,030		4,030		1,566
Commercial, industrial and agricultural real estate		7,307		7,378		14,118		14,312		2,170
Commercial, industrial and agricultural		51		52		2,347		2,386		854
Consumer		-		-		3		3		3
Total	$	11,438	$	11,510	$	21,749	$	21,988	$	4,776

The following table shows the average of impaired loans and related interest income for the three and six months ended June 30, 2011:

	Three Months Ended				Six Months Ended
	June 30, 2011				June 30, 2011
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	556	$	1	$	787	$	11
Junior liens and lines of credit		350		-		326		1
Total		906		1		1,113		12
Residential real estate - construction		10,933		27		10,214		63
Commercial, industrial and agricultural real estate		18,666		38		18,574		155
Commercial, industrial and agricultural		1,323		7		1,827		18
Consumer		-		-		1		-
Total	$	31,828	$	73	$	31,729	$	248

The following table presents a summary of nonperforming assets as of June 30, 2011 and December 31, 2010:

	June 30, 2011						December 31, 2010
				% of Loan						% of Loan
(Dollars in thousands)	Balance			Segment			Balance			Segment
Nonaccrual loans
Residential Real Estate 1-4 Family
First liens	$	676			0.48	%	$	691			0.48	%
Junior liens and lines of credit		307			0.57	%		122			0.22	%
Total		983			0.50	%		813			0.40	%
Residential real estate - construction		10,365			15.86	%		6,500			8.17	%
Commercial, industrial and agricultural real estate		10,661			3.32	%		13,003			4.27	%
Commercial, industrial and agricultural		1,537			0.88	%		1,668			1.14	%
Consumer		-			-			-			-
Total nonaccrual loans	$	23,546					$	21,984
Loans past due 90 days or more and not included above
Residential Real Estate 1-4 Family
First liens	$	1,417					$	1,093
Junior liens and lines of credit		447						833
Total		1,864						1,926
Residential real estate - construction		1,827						911
Commercial, industrial and agricultural real estate		3,798						2,343
Commercial, industrial and agricultural		1,653						244
Consumer		19						125
Total loans past due 90 days or more and still accruing		9,161						5,549
Total nonperforming loans		32,707						27,533
Other real estate		492						618
Total nonperforming assets	$	33,199					$	28,151
Restructured Loans (TDRs)
Performing	$	3,183					$	656
Non-performing (included above)		2,217						-
Total TDRs	$	5,400					$	656
Nonaccrual loans to total gross loans		3.05	%					2.94	%
Nonperforming loans to total gross loans		4.24	%					3.68	%
Nonperforming assets to total assets		3.30	%					2.96	%
Allowance for loan losses to nonperforming loans		31.03	%					31.97	%

The following table presents the aging of payments of the loan portfolio:

			Loans Past Due and Stll Accruing										Total
(Dollars in thousands)	Current		30-59 Days		60-89 Days		90 Days+		Total		Non-Accrual		Loans
June 30, 2011
Residential Real Estate 1-4 Family
First liens	$	139,845	$	-	$	333	$	1,417	$	1,750	$	676	$	142,271
Junior liens and lines of credit		52,896		-		69		447		516		307		53,719
Total		192,741		-		402		1,864		2,266		983		195,990
Residential real estate - construction		50,622		2,553		-		1,827		4,380		10,365		65,367
Commercial, industrial and agricultural real estate		301,190		938		4,137		3,798		8,873		10,661		320,724
Commercial, industrial and agricultural		171,574		300		-		1,653		1,953		1,537		175,064
Consumer		14,777		-		56		19		75		-		14,852
Total	$	730,904	$	3,791	$	4,595	$	9,161	$	17,547	$	23,546	$	771,997
December 31, 2010
Residential Real Estate 1-4 Family
First liens	$	140,711	$	979	$	654	$	1,093	$	2,726	$	691	$	144,128
Junior liens and lines of credit		55,723		16		-		833		849		122		56,694
Total		196,434		995		654		1,926		3,575		813		200,822
Residential real estate - construction		72,146		-		-		911		911		6,500		79,557
Commercial, industrial and agricultural real estate		285,050		3,786		13		2,343		6,142		13,003		304,195
Commercial, industrial and agricultural		142,829		1,786		145		244		2,175		1,668		146,672
Consumer		17,077		164		30		125		319		-		17,396
Total	$	713,536	$	6,731	$	842	$	5,549	$	13,122	$	21,984	$	748,642

The following table reports the internal credit rating for those loans in the portfolio that are assigned an individual credit rating (primarily commercial loans):

			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
June 30, 2011
Residential Real Estate 1-4 Family
First liens	$	44,905	$	1,500	$	3,098	$	-	$	49,503
Junior liens and lines of credit		9,806		214		414		-		10,434
Total		54,711		1,714		3,512		-		59,937
Residential real estate - construction		45,855		5,791		12,664		-		64,310
Commercial, industrial and agricultural real estate		276,259		24,249		20,216		-		320,724
Commercial, industrial and agricultural		161,194		6,176		7,694		-		175,064
Total	$	538,019	$	37,930	$	44,086	$	-	$	620,035
December 31, 2010
Residential Real Estate 1-4 Family
First liens	$	40,051	$	1,821	$	3,299	$	-	$	45,171
Junior liens and lines of credit		10,565		68		391		-		11,024
Total		50,616		1,889		3,690		-		56,195
Residential real estate - construction		59,097		6,671		11,892		-		77,660
Commercial, industrial and agricultural real estate		273,279		8,481		22,435		-		304,195
Commercial, industrial and agricultural		132,981		6,383		7,308		-		146,672
Total	$	515,973	$	23,424	$	45,325	$	-	$	584,722

For loans that are not assigned an individual credit rating (primarily consumer and residential mortgage loans), the Bank evaluates credit quality based on the aging status of the loan (previously presented) and the performing status.  The following table presents the performance status on selected loans:

(Dollars in thousands)	June 30, 2011
	Consumer				Residential Real Estate
	Lines of Credit		Installment		Home Equity Lines		Mortgages		Total
Performing	$	3,236	$	11,597	$	18,280	$	117,068	$	150,181
Non-performing		-		19		33		1,729		1,781
Total	$	3,236	$	11,616	$	18,313	$	118,797	$	151,962
	December 31, 2010
	Consumer				Residential Real Estate
	Lines of Credit		Installment		Home Equity Lines		Mortgages		Total
Performing	$	3,231	$	14,040	$	17,939	$	127,236	$	162,446
Non-performing		11		114		99		1,250		1,474
Total	$	3,242	$	14,154	$	18,038	$	128,486	$	163,920

The following table presents information on the Bank's Troubled Debt Restructuring (TDR) loans:

					New Troubled Debt				Troubled Debt Restructings
					Restructings in				that Subsequently Defaulted
(Dollars in thousands)	Troubled Debt Restructings				YTD Period				during YTD Period
	Number of		Recorded		Number of		Recorded		Number of		Recorded
	Contracts		Investment		Contracts		Investment		Contracts		Investment
June 30, 2011
Commercial, industrial and agricultural		9	$	5,400		7	$	4,767		2	$	633
Total		9	$	5,400		7	$	4,767		2	$	633
December 31, 2010
Commercial, industrial and agricultural		1	$	656		-	$	-		-	$	-
Total		1	$	656		-	$	-		-	$	-