Note 2: Restatement of Consolidated Financial Statements

Subsequent to filing the Company's annual report on Form 10-K for the year ended December 31, 2012, the Company determined that certain loans should have been reflected as nonaccrual status in the related disclosures and analysis in the footnotes to the consolidated financial statements. This restatement had no effect on the consolidated balance sheet at December 31, 2012, or the consolidated statements of income, comprehensive income or cash flows for the year ended December 31, 2012.

The effect of the restatement on the footnotes to the consolidated financial statements is as follows:

Restatements to Note 6: Allowance for Loan Losses, Nonperforming Assets and Impaired Loans

	Activity in the Allowance for Loan Losses by Segment for the year ended December 31, 2012
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate		Unallocated			Total
Provision for loan losses
As reported	$	723	$	1,380	$	1,389	$	(410	)	$	(90	)	$	182	$	(40	)	$	3,134
As restated		618		1,380		1,516		(407	)		(90	)		189		(72	)		3,134
Balance, December 31, 2012
As reported	$	1,175	$	2,263	$	3,315	$	956		$	142		$	417	$	81		$	8,349
As restated		1,070		2,263		3,442		959			142			424		49			8,349

	Allowance for Loan Losses by Segment and Evaluation Method as of
	December 31, 2012
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment
As reported	$	---	$	43	$	---	$	226	$	---	$	---	$	---	$	269
As restated		---		43		273		231		---		7		---		554
Collectively evaluated for impairment
As reported	$	1,175	$	2,220	$	3,315	$	730	$	142	$	417	$	81	$	8,080
As restated		1,070		2,220		3,169		728		142		417		49		7,795
Total
As reported	$	1,175	$	2,263	$	3,315	$	956	$	142	$	417	$	81	$	8,349
As restated		1,070		2,263		3,442		959		142		424		49		8,349

	Loans by Segment and Evaluation Method as of
	December 31, 2012
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment
As reported	$	3,623	$	864	$	6,048	$	518	$	---	$	---	$	---	$	11,053
As restated		6,643		864		10,329		574		---		46		---		18,456
Collectively evaluated for impairment
As reported	$	46,690	$	142,398	$	298,260	$	36,831	$	26,169	$	31,714	$	---	$	582,062
As restated		43,670		142,398		293,979		36,775		26,169		31,668		---		574,659

A summary of nonperforming assets follows:

	December 31,
	2012			2012
	As reported			As restated
Nonperforming assets:
Nonaccrual loans	$	3,466		$	10,870
Restructured loans in nonaccrual		2,151			2,151
Total nonperforming loans		5,617			13,021
Other real estate owned, net		1,435			1,435
Total nonperforming assets		7,052			14,456
Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned		1.19	%		2.44	%
Ratio of allowance for loan losses to nonperforming loans⁽¹⁾		148.64	%		64.12	%

(1)	The Company defines nonperforming loans as total nonaccrual and restructured loans that are nonaccrual. Loans 90 days past due and still accruing and accruing restructured loans are excluded.

A summary of loans past due 90 days or more and impaired loans follows:

	December 31,
	2012			2012
	As reported			As restated
Impaired loans:
Impaired loans with no valuation allowance	$	10,422		$	16,974
Impaired loans with a valuation allowance		631			1,482
Total impaired loans		11,053			18,456
Valuation allowance		(269	)		(554	)
Impaired loans, net of allowance	$	10,784			17,902
Average recorded investment in impaired loans⁽¹⁾	$	13,520			13,540

(1)	Recorded investment includes principal, accrued interest, and deferred fees and costs.

	Impaired Loans as of December 31, 2012
	Principal Balance		(A) Total Recorded Investment⁽¹⁾		Recorded Investment⁽¹⁾ in (A) for Which There is No Related Allowance		Recorded Investment⁽¹⁾ in (A) for Which There is a Related Allowance		Related Allowance
Real Estate Construction
Construction, other
As reported	$	3,500	$	3,481	$	3,481	$	---	$	---
As restated		6,520		6,487		6,487		---		---
Commercial Real Estate
Multifamily real estate
As reported	$	1,752	$	1,760	$	1,760	$	---	$	---
As restated		5,284		5,288		5,288		---		---
Commercial real estate, owner occupied
As reported	$	4,296	$	4,293	$	4,293	$	---	$	---
As restated		5,045		5,043		4,293		750		273
Consumer Non Real Estate
Commercial and industrial
As reported	$	518	$	519	$	40	$	479	$	226
As restated		574		574		39		535		231
Consumer Non Real Estate
Automobile
As reported	$	---	$	---	$	---	$	---	$	---
As restated		46		46		---		46		7
Total
As reported	$	11,053	$	11,037	$	10,407	$	630	$	269
As restated		18,456		18,422		16,940		1,482		554

	Average Investment and Interest Income for Impaired Loans
	For the Year Ended December 31, 2012
	Average Recorded Investment⁽¹⁾
	As reported			As restated
Real Estate Construction
Construction, other		$	4,282		$	4,290

Commercial Real Estate
Multifamily real estate			1,456			1,466
Commercial real estate, owner occupied			4,804			4,806
Total		$	13,520		$	13,540

(1)	Recorded investment includes the unpaid principal balance and any accrued interest and deferred fees.

An analysis of past due and nonaccrual loans follows:

December 31, 2012
	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, other
As reported	$	31	$	89	$	---	$	89
As restated		31		89		---		3,109
Commercial Real Estate
Multifamily real estate
As reported	$	4,202	$	261	$	---	$	1,093
As restated		671		261		---		4,624
Commercial real estate, owner occupied
As reported	$	1,113	$	---	$	---	$	2,785
As restated		1,113		---		---		3,536
Commercial Non Real Estate
Commercial and Industrial
As reported	$	347	$	505	$	---	$	505
As restated		291		505		---		561
Consumer Non Real Estate
Automobile
As reported	$	142	$	10	$	10	$	3
As restated		142		10		10		49
Total
As reported	$	7,677	$	3,755	$	170	$	5,617
As restated		4,090		3,755		170		13,021

The following displays non-impaired loans by quality indicator:

December 31, 2012

	Pass		Special Mention		Classified (Excluding Impaired)
Real Estate Construction
Construction, other
As reported	$	29,011	$	3,020	$	120
As restated		29,011		---		120
Commercial Real Estate
Multifamily residential real estate
As reported	$	36,432	$	3,520	$	324
As restated		36,421		---		324
Commercial real estate owner-occupied
As reported	$	160,188	$	1,004	$	1,079
As restated		160,188		253		1,079
Commercial Non Real Estate
Commercial and Industrial
As reported	$	36,374	$	152	$	318
As restated		36,372		99		318
Consumer Non Real Estate
Automobile
As reported	$	12,391	$	101	$	56
As restated		12,344		101		56
Total
As reported	$	564,391		11,983	$	4,735
As restated		564,331		4,639		4,735

Restatement to Note 17: Fair Measurements

				Carrying value
Date	Description	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
December 31, 2012	Impaired loans net of valuation allowance
As reported		$	362	$	---	$	---	$	362
As restated			928		---		---		928

The following table presents information about Level 3 Fair Value Measurements for December 31, 2012.

Valuation Technique

Unobservable Input

Range
(Weighted Average)

Impaired loans

Present value of cash flows

Discount rate

As reported

As restated

6.00% - 7.50% (6.28%)