Loans Receivable (Tables)

12 Months Ended

Dec. 31, 2012

Loans receivable consist of the following:

	December 31,
	2012			2011
	(dollars in thousands)
Residential mortgage, total	$	269,405		$	295,876
Individually evaluated for impairment		46,218			51,007
Collectively evaluated for impairment		223,187			244,869

Construction, land acquisition and development, total		71,523			99,122
Individually evaluated for impairment		11,003			35,398
Collectively evaluated for impairment		60,520			63,724

Land, total		50,900			59,649
Individually evaluated for impairment		8,953			11,384
Collectively evaluated for impairment		41,947			48,265

Lines of credit, total		31,428			34,278
Individually evaluated for impairment		2,107			5,735
Collectively evaluated for impairment		29,321			28,543

Commercial real estate, total		222,038			203,010
Individually evaluated for impairment		16,433			24,354
Collectively evaluated for impairment		205,605			178,656

Commercial non-real estate, total		6,120			5,599
Individually evaluated for impairment		108			32
Collectively evaluated for impairment		6,012			5,567

Home equity, total		34,609			41,309
Individually evaluated for impairment		1,776			2,340
Collectively evaluated for impairment		32,833			38,969

Consumer, total		858			897
Individually evaluated for impairment		24			24
Collectively evaluated for impairment		834			873

Total Loans		686,881			739,740
Individually evaluated for impairment		86,622			130,274
Collectively evaluated for impairment		600,259			609,466

Less
Loans in process		(15,647	)		(18,014	)
Allowance for loan losses		(17,478	)		(25,938	)
Deferred loan origination fees and costs, net		(2,047	)		(2,485	)

	$	651,709		$	693,303

Allowance for loan losses

The following is a summary of the allowance for loan losses for the year ended December 31, 2012 and 2011 (dollars in thousands):

2012	Total			Residential Mortgage			Acquisition and Development			Land			Lines of Credit			Commercial Real Estate			Commercial Non-Real Estate			Home Equity			Consumer
Beginning Balance	$	25,938		$	12,303		$	3,916		$	2,405		$	725		$	4,157		$	169		$	2,257		$	6
Provision		765			396			(401	)		1,464			(456	)		(446	)		(213	)		404			17
Charge-offs		(9,353	)		(4,299	)		(1,395	)		(1,624	)		(182	)		(416	)		(20	)		(1,407	)		(10	)
Recoveries		128			18			-			-			-			-			110			-			-
Ending Balance	$	17,478		$	8,418		$	2,120		$	2,245		$	87		$	3,295		$	46		$	1,254		$	13

Loans individually evaluated for impairment	$	7,594		$	4,196		$	1,663		$	551		$	32		$	975		$	5		$	160		$	12
Loans collectively evaluated for impairment	$	9,884		$	4,222		$	457		$	1,694		$	55		$	2,320		$	41		$	1,094		$	1

2011

Beginning Balance	$	29,871		$	16,339		$	3,997		$	4,225		$	458		$	3,949		$	131		$	762		$	10
Provision		4,612			385			1,422			(766	)		267			1,019			38			1,534			713
Charge-offs		(8,545	)		(4,421	)		(1,503	)		(1,054	)		(-	)		(811	)		(-	)		(39	)		(717	)
Recoveries		-			-			-			-			-			-			-			-			-
Ending Balance	$	25,938		$	12,303		$	3,916		$	2,405		$	725		$	4,157		$	169		$	2,257		$	6
Loans individually evaluated for impairment	$	12,994		$	5,509		$	2,624		$	1,365		$	510		$	960		$	28		$	1,998		$	-
Loans collectively evaluated for impairment	$	12,944		$	6,794		$	1,292		$	1,040		$	215		$	3,197		$	141		$	259		$	6

The following is a summary of the allowance for loan losses for the year ended December 31, 2010 (dollars in thousands):

2010

Beginning Balance	$	34,693		$	19,621		$	1,492		$	5,539		$	20		$	5,506		$	82		$	2,425		$	8
Provision		5,744			3,443			2,505			1,782			438			(1,034	)		49			(1,446	)		7
Charge-offs		(10,666	)		(6,825	)		(-	)		(3,096	)		(-	)		(523	)		(-	)		(217	)		(5	)
Recoveries		100			100			-			-			-			-			-			-			-
Ending Balance	$	29,871		$	16,339		$	3,997		$	4,225		$	458		$	3,949		$	131		$	762		$	10
Loans individually evaluated for impairment	$	14,540		$	8,149		$	2,645		$	2,282		$	264		$	766		$	-		$	434		$	-
Loans collectively evaluated for impairment	$	15,331		$	8,190		$	1,352		$	1,943		$	194		$	3,183		$	131		$	328		$	10

Non-performing assets

The following table presents Bancorp's non-performing assets as of December 31, 2012 and 2011 (dollars in thousands):

	December 31, 2012			Number of loans		December 31, 2011			Number of loans

Loans accounted for on a non-accrual basis:
Residential mortgage	$	14,436			46	$	8,912			25
Acquisition and development		8,564			17		10,997			11
Land		4,688			13		6,813			14
Lines of credit		1,877			4		2,019			4
Commercial real estate		5,793			10		2,140			5
Commercial non-real estate		111			3		5			1
Home equity		2,000			9		343			3
Consumer		26			2		203			4
Total non-accrual loans	$	37,495			104	$	31,432			67
Accruing loans greater than 90 days past due		-					-
Foreclosed real-estate		11,441					19,932
Total non-performing assets	$	48,936				$	51,364
Nonaccrual troubled debt restructures (included above)	$	5,635			28	$	19,351			38
Accruing troubled debt restructurings	$	56,448			119	$	40,424			77
Total non-accrual loans to net loans		5.8	%				4.5	%
Allowance for loan losses	$	17,478				$	25,938
Allowance to total loans		2.6	%				3.6	%
Allowance for loan losses to total non-performing loans,
including loans contractually past due 90 days or more		46.6	%				82.5	%
Total non-accrual and accruing loans greater than
90 days past due to total assets		4.4	%				3.5	%
Total non-performing assets to total assets		5.7	%				5.7	%

Impaired loans

The following tables summarize impaired loans at December 31, 2012 (dollars in thousands):

	Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
	Recorded Investment		Related Allowance		Recorded Investment		Recorded Investment		Unpaid Principal Balance

Residential mortgage	$	33,300	$	4,196	$	12,918	$	46,218	$	48,239
Acquisition and development		5,204		1,663		5,799		11,003		11,614
Land		2,583		551		6,370		8,953		9,373
Lines of credit		149		32		1,958		2,107		2,119
Commercial real estate		10,304		975		6,129		16,433		16,504
Commercial non-real estate		5		5		103		108		138
Home equity		259		160		1,517		1,776		3,100
Consumer		24		12		-		24		23
Total Impaired loans	$	51,828	$	7,594	$	34,794	$	86,622	$	91,110

	Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance				Total Impaired Loans
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized

Residential mortgage	$	33,864	$	1,415	$	13,747	$	516	$	47,611	$	1,931
Acquisition and development		5,660		211		7,224		210		12,884		421
Land		3,207		138		7,725		144		10,932		282
Lines of credit		149		7		1,961		6		2,110		13
Commercial real estate		10,450		556		6,236		305		16,686		861
Commercial non-real estate		26		-		106		-		132		-
Home equity		259		4		1,519		39		1,778		43
Consumer		23		-		-		-		23		-
Total Impaired loans	$	53,638	$	2,331	$	38,518	$	1,220	$	92,156	$	3,551

The following tables summarize impaired loans at December 31, 2011 (dollars in thousands):

	Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
	Recorded Investment		Related Allowance		Recorded Investment		Recorded Investment		Unpaid Principal Balance

Residential mortgage	$	26,736	$	5,509	$	24,271	$	51,007	$	50,310
Acquisition and development		18,023		2,624		17,375		35,398		34,535
Land		2,850		1,365		8,534		11,384		9,949
Lines of credit		1,548		510		4,187		5,735		5,735
Commercial real estate		4,694		960		19,660		24,354		24,354
Commercial non-real estate		28		28		4		32		32
Home equity		2,170		1,998		170		2,340		2,340
Consumer		-		-		24		24		24
Total Impaired loans	$	56,049	$	12,994	$	74,225	$	130,274	$	127,279

	Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance				Total Impaired Loans
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized

Residential mortgage	$	26,826	$	1,080	$	25,659	$	1,201	$	52,485	$	2,281
Acquisition and development		19,968		793		19,199		696		39,167		1,489
Land		3,770		236		9,143		261		12,913		497
Lines of credit		590		87		4,187		143		4,777		230
Commercial real estate		4,723		191		19,821		1,185		24,544		1,376
Commercial non-real estate		28		-		5		-		33		-
Home equity		1,772		66		170		4		1,942		70
Consumer		-		-		23		-		23		-
Total Impaired loans	$	57,677	$	2,453	$	78,207	$	3,490	$	135,884	$	5,943

Schedule of changes in impaired loans

Changes in impaired loans during 2012 are as follows (dollars in thousands):

Impaired loans at December 31, 2011	$	130,274
Added to impaired loans		23,272
Gross loans transferred to foreclosed real estate		(16,515	)
Transferred out of impaired loans		(50,409	)
Impaired loans at December 31, 2012	$	86,622

Changes in impaired loans during 2011 are as follows (dollars in thousands):

Impaired loans at December 31, 2010	$	120,910
Added to impaired loans		53,134
Gross loans transferred to foreclosed real estate		(19,820	)
Transferred out of impaired loans		(23,950	)
Impaired loans at December 31, 2011	$	130,274

Classes of the loan portfolio

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of December 31, 2012 and 2011 (dollars in thousands):

	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2012
Residential mortgage	$	228,200	$	15,338	$	25,818	$	49	$	269,405
Acquisition and development		41,165		7,750		22,598		10		71,523
Land		29,830		13,317		7,753		-		50,900
Lines of credit		24,059		2,270		5,099		-		31,428
Commercial real estate		197,752		10,399		13,887		-		222,038
Commercial non-real estate		5,990		-		22		108		6,120
Home equity		32,163		496		1,950		-		34,609
Consumer		835		-		-		23		858
Total loans	$	559,994	$	49,570	$	77,127	$	190	$	686,881

	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2011
Residential mortgage	$	259,359	$	8,624	$	27,689	$	204	$	295,876
Acquisition and development		62,054		6,521		30,547		-		99,122
Land		44,443		4,909		10,297		-		59,649
Lines of credit		27,067		1,708		5,503		-		34,278
Commercial real estate		180,635		10,702		11,673		-		203,010
Commercial non-real estate		5,567		-		4		28		5,599
Home equity		38,456		712		2,141		-		41,309
Consumer		874		-		23		-		897
Total loans	$	618,455	$	33,176	$	87,877	$	232	$	739,740

Interest income that would have been recorded under the original terms of non accrual loans and the interest income actually recognized

Interest income that would have been recorded under the original terms of non-accrual loans and the interest income actually recognized for the years ended December 31, 2012, 2011 and 2010 are summarized below (dollars in thousands):

	2012		2011		2010

Interest income that would have been recorded	$	3,148	$	2,905	$	4,905
Interest income recognized		1,184		822		2,599
Interest income not recognized	$	1,964	$	2,083	$	2,306

Classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of December 31, 2012 and 2011 (dollars in thousands):

	Current		30-59 Days Past Due		60-89 Days Past Due		Total Past Due		Non- Accrual		Total Loans
December 31, 2012
Residential mortgage	$	245,193	$	8,202	$	1,574	$	9,776	$	14,436	$	269,405
Acquisition and development		62,091		868		-		868		8,564		71,523
Land		45,961		251		-		251		4,688		50,900
Lines of credit		27,635		440		1,476		1,916		1,877		31,428
Commercial real estate		212,468		3,777		-		3,777		5,793		222,038
Commercial non-real estate		5,746		263		-		263		111		6,120
Home equity		32,301		308		-		308		2,000		34,609
Consumer		821		11		-		11		26		858
Total Impaired loans	$	632,216	$	14,120	$	3,050	$	17,170	$	37,495	$	686,881

	Current		30-59 Days Past Due		60-89 Days Past Due		Total Past Due		Non- Accrual		Total Loans
December 31, 2011
Residential mortgage	$	272,543	$	9,696	$	4,725	$	14,421	$	8,912	$	295,876
Acquisition and development		87,756		369		-		369		10,997		99,122
Land		51,094		1,517		225		1,742		6,813		59,649
Lines of credit		32,221		-		38		38		2,019		34,278
Commercial real estate		198,049		2,535		286		2,821		2,140		203,010
Commercial non-real estate		5,584		10		-		10		5		5,599
Home equity		40,021		945		-		945		343		41,309
Consumer		694		-		-		-		203		897
Total Impaired loans	$	687,962	$	15,072	$	5,274	$	20,346	$	31,432	$	739,740

Financial instruments whose contract amounts represents credit risk

Unless otherwise noted, the Bank requires collateral or other security to support financial instruments with off-balance-sheet credit risk.

Financial Instruments Whose Contract Amounts Represent Credit Risk	Contract Amount At December 31,
	2012		2011
	(dollars in thousands)
Standby letters of credit	$	16,309	$	15,319
Home equity lines of credit		13,025		14,623
Unadvanced construction commitments		15,598		18,014
Mortgage loan commitments		13,601		1,059
Lines of credit		31,480		31,525
Loans sold with limited repurchase provisions		31,591		17,558

Troubled debt restructurings

The following tables summarize troubled debt restructurings at December 31, 2012 and 2011 (dollars in thousands):

December 31, 2012	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Residential mortgage		85	$	34,257	$	31,310
Acquisition and development		7		9,523		7,183
Land		16		5,130		4,127
Lines of credit		3		362		280
Commercial real estate		14		20,032		12,842
Commercial non-real estate		-		-		-
Home equity		1		100		100
Consumer		-		-		-
Total loans		126	$	69,404	$	55,842

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings That Subsequently Defaulted:
Residential mortgage		17	$	5,095	$	4,112
Acquisition and development		1		2,090		1,550
Land		2		455		443
Lines of credit		1		140		136
Commercial real estate		-		-		-
Commercial non-real estate		-		-		-
Home equity		-		-		-
Consumer		-		-		-
Total loans		21	$	7,780	$	6,241

December 31, 2011	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Residential mortgage		68	$	30,372	$	29,815
Acquisition and development		8		11,152		10,260
Land		9		3,985		3,802
Lines of credit		2		332		332
Commercial real estate		8		8,215		8,046
Commercial non-real estate		-		-		-
Home equity		-		-		-
Consumer		-		-		-
Total loans		95	$	54,056	$	52,255

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings That Subsequently Defaulted:
Residential mortgage		14	$	4,568	$	4,542
Acquisition and development		1		2,090		2,090
Land		3		464		462
Lines of credit		1		140		140
Commercial real estate		1		288		286
Commercial non-real estate		-		-		-
Home equity		-		-		-
Consumer		-		-		-
Total loans		20	$	7,550	$	7,520

Newly restructured loans during the period

The following tables present newly restructured loans that occurred during the year ended December 31, 2012 and 2011 (dollars in thousands):

	Year ended December 31, 2012
	Rate Modification		Contracts		Term Modifications		Contracts		Combination Modifications		Contracts		Total		Total Contracts

Pre-Modification Outstanding Recorded Investment:

Residential mortgage	$	694		1	$	659		3	$	12,367		37	$	13,720		41
Acquisition and development		-		-		-		-		-		-		-		-
Land		-		-		176		1		816		4		992		5
Lines of credit		-		-		-		-		-		-		-		-
Commercial real estate		-		-		704		3		13,074		3		13,778		6
Commercial non-real estate		-		-		-		-		-		-		-		-
Home equity		-		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-		-
Total loans	$	694		1	$	1,539		7	$	26,257		44	$	28,490		52

Post-Modification Outstanding Recorded Investment:

Residential mortgage	$	694		1	$	657		3	$	11,388		37	$	12,739		41
Acquisition and development		-		-		-		-		-		-		-		-
Land		-		-		176		1		809		4		985		5
Lines of credit		-		-		-		-		-		-		-		-
Commercial real estate		-		-		689		3		6,530		3		7,219		6
Commercial non-real estate		-		-		-		-		-		-		-		-
Home equity		-		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-		-
Total loans	$	694		1	$	1,522		7	$	18,727		44	$	20,943		52

In addition, the TDR is evaluated for impairment. A determination is made as to whether an impaired TDR is cash flows or collateral dependent. If the TDR is cash flows dependent, an allowance for loan losses specific reserve is calculated based on the difference in net present value of future cash flows between the original and modified loan terms. If the TDR is collateral dependent, the collateral securing the TDR, which is always real estate, is evaluated for impairment based on either an appraisal or broker price opinion. If a TDR's collateral valuation is less than its current loan balance, the TDR is written down for accounting purposes by the amount of the difference between the current loan balance and the collateral. If the borrower performs under the terms of the modification, generally six consecutive months, and the ultimate collectability of all amounts contractually due under the modified terms is not in doubt, the loan is returned to accrual status. There are no loans that have been modified due to the financial difficulties of the borrower that are not considered a TDR.

	Year ended December 31, 2011
	Rate Modification	Contracts	Combination Modifications	Contracts	Total	Total Contracts

Pre-Modification Outstanding Recorded Investment:

Residential mortgage	$817	2	$22,282	43	$23,099	45
Acquisition and development	3,930	1	5,580	5	9,510	6
Land	552	1	1,927	6	2,479	7
Lines of credit	-	-	332	2	332	2
Commercial real estate	262	1	7,427	6	7,689	7
Commercial non-real estate	-	-	-	-	-	-
Home equity	-	-	-	-	-	-
Consumer	-	-	-	-	-	-
Total loans	$5,561	5	$37,548	62	$43,109	67

Post-Modification Outstanding Recorded Investment:

Residential mortgage	$738	2	$21,861	43	$22,599	45
Acquisition and development	3,930	1	4,914	5	8,844	6
Land	551	1	1,916	6	2,467	7
Lines of credit	-	-	332	2	332	2
Commercial real estate	262	1	7,433	6	7,695	7
Commercial non-real estate	-	-	-	-	-	-
Home equity	-	-	-	-	-	-
Consumer	-	-	-	-	-	-
Total loans	$5,481	5	$36,456	62	$41,937	67

Methods used to account for interest on TDRs

Interest on TDRs was accounted for under the following methods as of December 31, 2012 and December 31, 2011 (dollars in thousands):

	Number of Contracts		Accrual Status		Number of Contracts		Non-Accrual Status		Total Number of Contracts		Total Modifications
December 31, 2012
Residential mortgage		88	$	33,143		14	$	2,279		102	$	35,422
Acquisition and development		4		7,075		4		1,658		8		8,733
Land		14		3,783		5		787		19		4,570
Lines of credit		3		280		1		136		4		416
Commercial real estate		10		12,167		3		675		13		12,842
Commercial non-real estate		-		-		-		-		-		-
Home equity		-		-		1		100		1		100
Consumer		-		-		-		-		-		-
Total loans		119	$	56,448		28	$	5,635		147	$	62,083
December 31, 2011
Residential mortgage		57	$	22,820		25	$	11,537		82	$	34,357
Acquisition and development		8		11,962		1		388		9		12,350
Land		6		2,333		6		1,931		12		4,264
Lines of credit		1		140		2		332		3		472
Commercial real estate		5		3,169		4		5,163		9		8,332
Commercial non-real estate		-		-		-		-		-		-
Home equity		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Total loans		77	$	40,424		38	$	19,351		115	$	59,775