10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended September 30, 2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______________to___________________

Commission File Number: 001-34214

THE BANK OF KENTUCKY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Kentucky	61-1256535
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

111 Lookout Farm Drive, Crestview Hills, Kentucky 41017

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number: (859) 371-2340

Indicate by checkmark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company,” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ¨	Accelerated filer x
Non-accelerated filer ¨	Smaller reporting company ¨
(do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of October 19, 2012, 7,470,236 shares of the registrant's Common Stock, no par value, were issued and outstanding.

The Bank of Kentucky Financial Corporation

INDEX

Part I	FINANCIAL INFORMATION	PAGE
	Item 1 – Financial Statements	3
	Item 2 – Management’s Discussion and Analysis of   Financial Condition and Results of Operations	33
	Item 3 – Quantitative and Qualitative Disclosures About   Market Risk	50
	Item 4 – Controls and Procedures	50
Part II	OTHER INFORMATION
	Item 1 – Legal Proceedings	51
	Item 1A – Risk Factors	51
	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	51
	Item 3 – Defaults upon Senior Securities	51
	Item 4 – Mine Safety Disclosures	51
	Item 5 – Other Information	51
	Item 6 – Exhibits	51

2

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

THE BANK OF KENTUCKY FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except per share data - unaudited)

	September 30, 2012		December 31, 2011
Assets
Cash and cash equivalents	$	81,950	$	135,964
Interest-bearing deposits with banks		250		250
Available-for-sale securities		302,544		322,512
Held-to-maturity securities		58,314		48,975
Loans held for sale		19,314		8,920
Total loans		1,159,074		1,129,954
Less:  Allowance for loan losses		16,585		18,288
Net loans		1,142,489		1,111,666
Premises and equipment, net		22,714		22,827
FHLB stock, at cost		5,099		5,099
Goodwill		22,023		22,023
Acquisition intangibles, net		2,645		3,228
Cash surrender value of life insurance		33,509		32,850
Accrued interest receivable and other assets		31,103		30,410
Total assets	$	1,721,954	$	1,744,724
Liabilities & Shareholders’ Equity
Liabilities
Deposits	$	1,471,246	$	1,498,821
Short-term borrowings		22,142		29,300
Notes payable		48,721		48,739
Accrued interest payable and other liabilities		12,224		11,294
Total liabilities		1,554,333		1,588,154
Shareholders’ Equity
Common stock, no par value, 15,000,000 shares authorized, 7,467,396 (2012) and 7,432,995 (2011) shares issued		3,098		3,098
Additional paid-in capital		34,971		34,121
Retained earnings		124,548		116,038
Accumulated other comprehensive income		5,004		3,313
Total shareholders’ equity		167,621		156,570
Total liabilities and shareholders’ equity	$	1,721,954	$	1,744,724

See accompanying notes.

3

THE BANK OF KENTUCKY FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(Dollars in thousands, except per share data - unaudited)

	Three Months Ended September 30					Nine Months  Ended September 30
INTEREST INCOME	2012		2011			2012		2011
Loans, including related fees	$	13,771	$	14,488		$	41,363	$	43,421
Securities and other		1,662		1,792			5,419		5,281
Total interest income		15,433		16,280			46,782		48,702
INTEREST EXPENSE
Deposits		1,214		1,954			4,128		6,493
Borrowings		257		250			801		758
Total interest expense		1,471		2,204			4,929		7,251
Net interest income		13,962		14,076			41,853		41,451
Provision for loan losses		2,200		2,550			5,700		8,550
Net interest income after provision for loan losses		11,762		11,526			36,153		32,901
NON-INTEREST INCOME
Service charges and fees		2,325		2,470			6,767		7,051
Mortgage banking income		917		704			2,092		1,209
Net securities gains (losses)		-		-			203		231
Company owned life insurance earnings		300		306			910		842
Bankcard transaction revenue		940		848			2,794		2,497
Trust fee income		710		630			2,093		2,016
Other		669		339			1,961		1,348
Total non-interest income		5,861		5,297			16,820		15,194
NON-INTEREST EXPENSE
Salaries and benefits		5,909		5,351			17,084		15,150
Occupancy and equipment		1,316		1,216			3,908		3,705
Data processing		505		500			1,573		1,461
Advertising		377		464			1,146		1,186
Other		3,692		3,196			10,957		10,209
Total non-interest expense		11,799		10,727			34,668		31,711
INCOME BEFORE INCOME TAXES		5,824		6,096			18,305		16,384
Less:  income taxes		1,628		1,822			5,170		4,804
NET INCOME	$	4,196	$	4,274		$	13,135	$	11,580
Preferred stock dividend and discount accretion		-		(261	)		-		(777	)
Net Income available to common shareholders	$	4,196	$	4,013		$	13,135	$	10,803
Comprehensive Income	$	5,463	$	5,136		$	14,826	$	14,549
Net income per common share:
Earnings per share, basic	$	.56	$	.54		$	1.76	$	1.45
Earnings per share, diluted	$	.56	$	.54		$	1.74	$	1.45

See accompanying notes.

4

THE BANK OF KENTUCKY FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30

(Dollars in thousands, except per share data -unaudited)

	Nine Months Ended September 30
	2012			2011
Beginning balance	$	156,570		$	159,370
Comprehensive income:
Net income		13,135			11,580
Change in net unrealized gain(loss), net of tax		1,691			2,969
Total comprehensive income		14,826			14,549
Cash dividends declared on common stock		(4,624	)		(4,162	)
Exercise of stock options (34,401 and 700 shares), including tax benefit		741			14
Stock-based compensation expense		108			152
Paid and accrued dividends on preferred stock		-			(637	)
Balance as of  September 30	$	167,621		$	169,286
Dividends per share	$	0.62		$	0.56

See accompanying notes.

5

THE BANK OF KENTUCKY FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30

(Dollars in thousands - unaudited)

	2012			2011
Cash Flows from Operating Activities
Net income	$	13,135		$	11,580
Adjustments to reconcile net income to net cash From operating activities		(1,246	)		19,113
Net cash from operating activities		11,889			30,693
Cash Flows from Investing Activities
Net change in interest-bearing balances		-			(150	)
Proceeds from paydowns and maturities of held-to-maturity securities		2,780			4,399
Proceeds from paydowns and maturities of available-for-sale securities		151,460			172,311
Purchases of held-to-maturity securities		(12,172	)		(10,048	)
Purchases of available-for-sale securities		(138,121	)		(231,932	)
Purchases of company owned life insurance		-			(6,500	)
Net change in loans		(39,438	)		(24,377	)
Proceeds from the sale of other real estate		2,488			3,021
Proceeds from the sale of securities		6,944			13,367
Property and equipment expenditures		(1,210	)		(722	)
Net cash from investing activities		(27,269	)		(80,631	)
Cash Flows from Financing Activities
Net change in deposits		(27,575	)		(53,097	)
Net change in short-term borrowings		(7,158	)		2,829
Proceeds from exercise of stock options		741			14
Cash dividends paid		(4,624	)		(4,799	)
Payments on note payable		(18	)		(16	)
Net cash from financing activities		(38,634	)		(55,069	)
Net change in cash and cash equivalents		(54,014	)		(105,007	)
Cash and cash equivalents at beginning of period		135,964			172,664
Cash and cash equivalents at end of period	$	81,950		$	67,657

See accompanying notes.

6

THE BANK OF KENTUCKY FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(unaudited)

Note 1 - Basis of Presentation:

The condensed consolidated financial statements include the accounts of The Bank of Kentucky Financial Corporation (“BKFC” or the “Company”) and its wholly owned subsidiary, The Bank of Kentucky, Inc. (the “Bank”). All significant intercompany accounts and transactions have been eliminated.

Note 2 - General:

These financial statements were prepared in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all of the disclosures necessary for a complete presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. Except for required accounting changes, these financial statements have been prepared on a basis consistent with the annual financial statements and include, in the opinion of management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results of operations and financial position at the end of and for the periods presented. These financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses and the fair values of financial instruments, in particular, are subject to change.

Note 3 - Earnings per Share:

Earnings per share are computed based upon the weighted average number of shares of common stock outstanding during the three and nine month periods. Diluted earnings per share show the potential dilutive effect of additional common shares issuable under the Company’s stock compensation plan and warrants. For the three months ended September 30, 2012 and 2011, 187,720 and 416,604 options were not considered, as they were not dilutive, and for the nine months ended September 30, 2012 and 2011, 264,389 and 354,616 options were not considered, as they were not dilutive. The following table presents the numbers of shares used to compute basic and diluted earnings per share for the indicated periods:

7

	Three Months Ended September 30				Nine Months Ended September 30
	2012		2011		2012		2011
Weighted average shares outstanding		7,465,926		7,432,995		7,459,988		7,432,762
Dilutive effects of assumed exercises of stock options, restricted stock units and warrants		88,133		55,748		77,415		41,332
Shares used to compute diluted earnings per share		7,554,059		7,488,743		7,537,403		7,474,094

Note 4 – Stock-Based Compensation:

Stock-based compensation in the form of options to buy stock and restricted stock units (“RSUs”) are granted to directors, officers and employees under the Company’s incentive stock plan (the “Plan”), which provides for the issuance of up to 1,000,000 shares.

Stock Options

The specific terms of each option agreement are determined by the Compensation Committee at the date of the grant. For current options outstanding, options granted to directors vest immediately and options granted to employees generally vest evenly over a five-year period.

The Company recorded stock option expense of $24,000 (net of taxes) and $76,000 (net of taxes) in the three and nine months ended September 30, 2012, and $51,000 (net of taxes) and $152,000 (net of taxes) in the three and nine months ended September 30, 2011.

Restricted Stock Units

The specific term of each RSU award are determined by the Compensation Committee at the date of the grant. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. The fair value of the stock was determined using the total number of RSU’s granted multiplied by the grant date fair market value of a share of company stock. RSU’s fully vest on the first anniversary of the grant date.

A summary of changes in the Company’s nonvested shares for the year follows:

			Weighted-Average
			Grant-Date
Nonvested Shares	Shares		Fair Value
Nonvested at January 1, 2012		0	$	-
Granted		4,185		25.80
Vested		0		-
Forfeited		0		-
Nonvested at September 30, 2012		4,185	$	25.80

8

The Company recorded RSU expense of $36,000 for the three and nine months ended September 30, 2012. As of September 30, 2012, there was $84,000 of total unrecognized compensation cost related to nonvested shares granted under the RRP. The cost is expected to be recognized over a period of 7 months.

Note 5 – Cash and Cash Equivalents:

Cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and investments in money market mutual funds. The Company reports net cash flows for customer loan and deposit transactions, interest-bearing balances with banks and short-term borrowings with maturities of 90 days or less.

Note 6 – Reclassification:

Certain prior period amounts have been reclassified to conform to the current period presentation. Such reclassifications have no effect on previously reported net income or shareholders’ equity.

Note 7 – New Accounting Pronouncements:

In May 2011, the Financial Accounting Standards Board (“FASB”) issued an amendment to achieve common fair value measurement and disclosure requirements between U.S. and International accounting principles. Overall, the guidance is consistent with existing U.S. accounting principles; however, there are some amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This update became effective for the Company for interim and annual reporting periods beginning after December 15, 2011 and did not have a material impact on the Company's consolidated financial position or results of operations.

In June 2011, the FASB amended existing guidance and eliminated the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. The amendment requires that comprehensive income be presented in either a single continuous statement or in two separate consecutive statements. This update became effective for the Company for interim and annual reporting periods beginning after December 15, 2011 and did not have a material impact on the Company's consolidated financial position or results of operations.

Note 8–Securities:

The fair value of available-for-sale securities and the related gains and losses recognized in accumulated other comprehensive income (loss) was as follows (in thousands):

9

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Available-for-Sale	Cost		Gains		Losses			Value
September 30, 2012
U.S. government, federal agencies and government sponsored enterprises	$	112,473	$	1,313	$	(23	)	$	113,763
U.S. government residential mortgage-backed		181,429		6,292		-			187,721
Corporate		1,060		-		-			1,060
	$	294,962	$	7,605	$	(23	)	$	302,544

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
December 31, 2011
U.S. government, federal agencies and government sponsored enterprises	$	168,104	$	1,368	$	(12	)	$	169,460
U.S. government residential mortgage-backed		148,329		3,727		(64	)		151,992
Corporate		1,060		-		-			1,060
	$	317,493	$	5,095	$	(76	)	$	322,512

The carrying amount, unrecognized gains and losses, and fair value of securities held-to-maturity were as follows (in thousands):

			Gross		Gross
	Amortized		Unrecognized		Unrecognized			Fair
Held-to-Maturity	Cost		Gains		Losses			Value
2012
Municipal and other obligations	$	58,314	$	2,169	$	(108	)	$	60,375
2011
Municipal and other obligations	$	48,975	$	1,693	$	(25	)	$	50,643

The amortized cost and fair value of debt securities and carrying amount, if different, at September 30, 2012 by contractual maturity were as follows (in thousands), with securities not due at a single maturity date, primarily mortgage-backed securities, shown separately.

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	610	$	616	$	3,353	$	3,368
Due after one year through five years		51,409		52,076		29,592		30,780
Due after five years through ten years		60,454		61,071		19,444		20,302
Due after ten years		1,060		1,060		5,925		5,925
U.S. Governmentagency mortgage-backed		181,429		187,721		-		-
	$	294,962	$	302,544	$	58,314	$	60,375

Proceeds on the sale of $6,944,000 of available-for-sale securities resulted in gains of $203,000 for the first nine months of 2012. No securities were sold with losses in the first nine months of 2012. Proceeds on the sale of $13,367,000 of available-for-sale securities resulted in gains of $231,000 for the first nine months of 2011, with no losses.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Investment securities classified as available-for-sale or held-to-maturity are evaluated for OTTI under ASC 320, Accounting for Certain Investments in Debt and Equity Securities.

10

In determining OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. Otherwise, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors shall be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings shall become the new amortized cost basis of the investment.

As of September 30, 2012, the Bank’s security portfolio consisted of 227 securities, 11 of which were in an unrealized loss position of $131,000. There was no OTTI of securities at September 30, 2012. Unrealized losses have not been recognized into income because the issuers’ bonds are of high credit quality (U.S. government agencies and government sponsored enterprises and “A” rated or better Kentucky municipalities), management does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery.

Mortgage-backed Securities

At September 30, 2012, 100% of the mortgage-backed securities held by the Bank were issued by U.S. government sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because a decline in market value would be attributable to changes in interest rates and illiquidity, and not credit quality, and because the Bank does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Bank does not consider these securities to be other than temporarily impaired at September 30, 2012.

At September 30, 2012 and December 31, 2011, securities with a carrying value of $327,242,000 and $342,288,000 were pledged to secure public deposits and repurchase agreements.

11

Securities with unrealized losses at September 30, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (in thousands):

	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Description of Securities	Value		Loss			Value		Loss			Value		Loss
September 30, 2012
U.S. government, federal agencies and government sponsored enterprises	$	4,992	$	(23	)	$	-	$	-		$	4,992	$	(23	)
Municipal & other obligations		5,518		(108	)		-		-			5,518		(108	)
Total temporarily impaired	$	10,510	$	(131	)	$	-	$	-		$	10,510	$	(131	)
December 31, 2011
U.S. government, federal agencies and government sponsored enterprises	$	18,734	$	(12	)	$	-	$	-		$	18,734	$	(12	)
U.S government residential mortgage-backed		36,707		(64	)		-		-			36,707		(64	)
Municipal & other obligations		3,225		(24	)		388		(1	)		3,613		(25	)
Total temporarily impaired	$	58,666	$	(100	)	$	388	$	(1	)	$	59,054	$	(101	)

Note 9 - Loans

Loan balances were as follows (in thousands):

	9/30/2012			12/31/2011
Commercial	$	181,170		$	193,176
Residential real estate		281,745			266,268
Nonresidential real estate		555,234			523,485
Construction		98,609			104,788
Consumer		16,170			16,618
Municipal obligations		27,603			27,066
Gross loans		1,160,531			1,131,401
Less: Deferred loan origination fees and discount		(1,457	)		(1,447	)
Allowance for loan losses		(16,585	)		(18,288	)
Net loans	$	1,142,489		$	1,111,666

12

The following tables present the activity in the allowance for loan losses for the three months ending September 30, 2012 and 2011, 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 September 30, 2011 (in thousands):

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations			Total
September 30, 2012
Allowance for loan losses
Beginning balance	$	2,159		$	3,786		$	6,666		$	5,167		$	392		$	176		$	18,346
Provision for loan losses		(215	)		2,095			875			(729	)		325			(151	)		2,200
Loans charged off		(89	)		(1,051	)		(436	)		(2,292	)		(371	)		-			(4,239	)
Recoveries		18			3			183			2			72			-			278
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25		$	16,585
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	317		$	1,729		$	2,993		$	1,215		$	-		$	-		$	6,254
Collectively evaluated for impairment		1,556			3,104			4,295			933			418			25			10,331
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25		$	16,585
Loans
Loans individually evaluated for impairment	$	1,118		$	8,500		$	19,111		$	5,774		$	-		$	-		$	34,503
Loans collectively evaluated for impairment		180,052			273,245			536,123			92,835			16,170			27,603			1,126,028
Total ending loans balance	$	181,170		$	281,745		$	555,234		$	98,609		$	16,170		$	27,603		$	1,160,531

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations			Total
September 30, 2011
Allowance for loan losses
Beginning balance	$	3,931		$	2,403		$	6,782		$	4,496		$	167		$	37		$	17,816
Provision for loan losses		262			384			1,590			181			154			(21	)		2,550
Loans charged off		(1,014	)		(210	)		(586	)		(501	)		(253	)		-			(2,564	)
Recoveries		28			2			16			-			93			-			139
Total ending allowance balance	$	3,207		$	2,579		$	7,802		$	4,176		$	161		$	16		$	17,941

13

The following tables present the activity in the allowance for loan losses for the nine months ending September 30, 2012 and 2011, 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 September 30, 2012 and December 31, 2011 (in thousands):

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations		Total
September 30, 2012
Allowance for loan losses
Beginning balance	$	3,207		$	2,591		$	7,614		$	4,701		$	162		$	13	$	18,288
Provision for loan losses		(892	)		3,782			1,095			977			726			12		5,700
Loans charged off		(461	)		(1,573	)		(1,609	)		(3,538	)		(696	)		-		(7,877	)
Recoveries		19			33			188			8			226			-		474
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25	$	16,585
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	317		$	1,729		$	2,993		$	1,215		$	-		$	-	$	6,254
Collectively evaluated for impairment		1,556			3,104			4,295			933			418			25		10,331
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25	$	16,585
Loans
Loans individually evaluated for impairment	$	1,118		$	8,500		$	19,111		$	5,774		$	-		$	-	$	34,503
Loans collectively evaluated for impairment		180,052			273,245			536,123			92,835			16,170			27,603		1,126,028
Total ending loans balance	$	181,170		$	281,745		$	555,234		$	98,609		$	16,170		$	27,603	$	1,160,531

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations			Total
September 30, 2011
Allowance for loan losses
Beginning balance	$	3,440		$	2,431		$	8,126		$	3,150		$	166		$	55		$	17,368
Provision for loan losses		1,649			780			2,728			3,025			407			(39	)		8,550
Loans charged off		(1,934	)		(674	)		(3,070	)		(2,000	)		(715	)		-			(8,393	)
Recoveries		52			42			18			1			303			-			416
Total ending allowance balance	$	3,207		$	2,579		$	7,802		$	4,176		$	161		$	16		$	17,941

14

					Non
			Residential		Residential						Municipal
	Commercial		Real estate		Real estate		Construction		Consumer		Obligations		Total
December 31, 2011
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	224	$	477	$	2,994	$	3,748	$	-	$	-	$	7,443
Collectively evaluated for impairment		2,983		2,114		4,620		953		162		13		10,845
	$	3,207	$	2,591	$	7,614	$	4,701	$	162	$	13	$	18,288
Loans
Loans individually evaluated for impairment	$	917	$	6,100	$	20,390	$	7,854	$	-	$	-	$	35,261
Loans collectively evaluated for impairment		192,259		260,168		503,095		96,934		16,618		27,066		1,096,140
Total ending loans balance	$	193,176	$	266,268	$	523,485	$	104,788	$	16,618	$	27,066	$	1,131,401

15

The following table presents individually impaired loans by class of loans as of and for the three months ended September 30, 2012 (in thousands):

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	30	$	30	$	-	$	170	$	-	$	-
Residential real estate
Home equity lines of credit		50		50		-		50		-		-
Multifamily properties		379		48		-		24		-		-
Other		2,869		2,626		-		2,336		-		-
Nonresidential real estate
Owner occupied properties		802		792		-		490		-		-
Non owner occupied properties		6,206		5,701		-		3,797		-		-
Construction		809		509		-		432		-		-
With an allowance recorded
Commercial		1,088		1,088		317		823		4		4
Residential real estate
Home equity lines of credit		1,488		1,488		1,341		813		12		12
Multifamily properties		1,324		1,324		243		1,554		11		11
Other		3,109		2,964		145		3,309		31		24
Nonresidential real estate
Owner occupied properties		8,544		8,543		2,651		8,774		81		81
Non owner occupied properties		4,595		4,074		342		6,449		34		34
Construction		6,387		5,266		1,215		6,494		45		45
Total	$	37,680	$	34,503	$	6,254	$	35,515	$	218	$	211

16

The following table presents individually impaired loans by class of loans as of and for the nine months ended September 30, 2012 (in thousands):

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	30	$	30	$	-	$	263	$	-	$	-
Residential real estate
Home equity lines of credit		50		50		-		50		-		-
Multifamily properties		379		48		-		273		-		-
Other		2,869		2,626		-		2,094		-		-
Nonresidential real estate
Owner occupied properties		802		792		-		698		-		-
Non owner occupied properties		6,206		5,701		-		2,848		-		-
Construction		809		509		-		256		-		-
With an allowance recorded
Commercial		1,088		1,088		317		950		7		5
Residential real estate
Home equity lines of credit		1,488		1,488		1,341		339		12		12
Multifamily properties		1,324		1,324		243		815		22		22
Other		3,109		2,964		145		3,557		76		64
Nonresidential real estate
Owner occupied properties		8,544		8,543		2,651		9,081		239		237
Non owner occupied properties		4,595		4,074		342		7,406		143		106
Construction		6,387		5,266		1,215		8,017		163		155
Total	$	37,680	$	34,503	$	6,254	$	36,647	$	662	$	601

17

The following table presents individually impaired loans by class of loans as of, and for the three months ended September 30, 2011:

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	349	$	310	$	-	$	371	$	-	$	-
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		-		-		-		-		-		-
Other		2,121		2,121		-		2,325		-		-
Nonresidential real estate
Owner occupied properties		1,011		955		-		587		-		-
Non owner occupied properties		897		897		-		1,044		-		-
Construction		2,036		889		-		909		-		-
With an allowance recorded
Commercial		1,379		1,379		504		2,370		10		5
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		868		868		291		869		14		9
Other		2,869		2,850		433		2,755		18		17
Nonresidential real estate
Owner occupied properties		9,471		9,348		1,093		5,123		80		25
Non owner occupied properties		13,667		11,830		2,185		9,870		90		90
Construction		8,962		7,726		3,256		8,459		76		75
Total	$	43,630	$	39,173	$	7,762	$	34,682	$	288	$	221

18

The following table presents individually impaired loans by class of loans as of and for the nine months ended September 30, 2011 (in thousands):

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	349	$	310	$	-	$	351	$	-	$	-
Residential real estate
Home equity lines of credit		-		-		-		-		-		- -
Multifamily properties		-		-		-		17		-		-
Other		2,121		2,121		-		1,288		-		-
Nonresidential real estate
Owner occupied properties		1,011		955		-		503		-		-
Non owner occupied properties		897		897		-		848		-		-
Construction		2,036		889		-		559		-		-
With an allowance recorded
Commercial		1,379		1,379		504		1,959		17		9
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		868		868		291		922		42		28
Other		2,869		2,850		433		2,441		54		51
Nonresidential real estate
Owner occupied properties		9,471		9,348		1,093		2,884		81		26
Non owner occupied properties		13,667		11,830		2,185		10,044		215		210
Construction		8,962		7,726		3,256		8,035		203		189
Total	$	43,630	$	39,173	$	7,762	$	29,851	$	612	$	513

19

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2011 (in thousands):

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance		Investment		Allocated
With no related allowance recorded
Commercial	$	350	$	310	$	-
Residential real estate
Home equity lines of credit		50		50		-
Multifamily properties		538		538		-
Other		1,703		1,703		-
Nonresidential real estate
Owner occupied properties		1,101		1,101		-
Non owner occupied properties		2,122		2,116		-
Construction		356		319		-
With an allowance recorded
Commercial		733		607		224
Residential real estate
Home equity lines of credit		-		-		-
Multifamily properties		-		-		-
Other		3,859		3,809		477
Nonresidential real estate
Owner occupied properties		10,771		9,798		1,477
Non owner occupied properties		8,476		7,375		1,517
Construction		8,267		7,535		3,748
Total	$	38,326	$	35,261	$	7,443

20

The following table presents the aging of the recorded investment in past due loans by class of loans as of September 30, 2012 and December 31, 2011 (in thousands):

	Loans		Loans over
	30-90 days		90 days				Loans not
	past due		past due		Nonaccrual		past due		Total
September 30, 2012
Commercial	$	599	$	-	$	968	$	179,603	$	181,170
Residential real estate
Home equity lines of credit		827		39		768		98,658		100,292
Multifamily properties		111		-		48		46,624		46,783
Other residential real estate		3,657		-		3,676		127,337		134,670
Nonresidential real estate
Owner occupied properties		3,591		-		1,368		273,240		278,199
Non owner occupied properties		1,881		-		6,305		268,849		277,035
Construction		737		-		1,601		96,271		98,609
Consumer
Credit card balances		32		66		-		6,399		6,497
Other consumer		13		-		79		9,581		9,673
Municipal obligations		-		-		-		27,603		27,603
Total	$	11,448	$	105	$	14,813	$	1,134,165	$	1,160,531

	Loans		Loans over
	30-90 days		90 days				Loans not
	past due		past due		Nonaccrual		past due		Total
December 31, 2011
Commercial	$	692	$	74	$	1,175	$	191,235	$	193,176
Residential real estate
Home equity lines of credit		1,094		-		910		92,676		94,680
Multifamily properties		-		-		-		36,756		36,756
Other residential real estate		5,854		112		4,415		124,451		134,832
Nonresidential real estate
Owner occupied properties		2,623		-		2,270		247,875		252,768
Non owner occupied properties		3,942		-		4,358		262,417		270,717
Construction		265		-		1,897		102,626		104,788
Consumer
Credit card balances		60		32		-		6,400		6,492
Other consumer		37		1		626		9,462		10,126
Municipal obligations		-		-		-		27,066		27,066
Total	$	14,567	$	219	$	15,651	$	1,100,964	$	1,131,401

21

Troubled Debt Restructurings:

The Company has allocated $2,837,000 and $2,074,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2012 and December 31, 2011, respectively. Troubled debt restructurings totaled $17,129,911 and $15,229,000 as of September 30, 2012 and December 31, 2011, respectively.The Company has not committed to lend additional amounts as of September 30, 2012 and December 31, 2011 to customers with outstanding loans that are classified as troubled debt restructurings.

Modifications involving a reduction of the stated interest rate of the loan were for periods up to three years. Modifications involving an extension of the maturity date were for periods ranging from eight months to twelve months.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ending September 30, 2012 and 2011:

	2012						2011
	Number Of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number Of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial		1	$	31,757	$	29,979		-	$	-	$	-
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		-		-		-		-		-		-
Other residential real estate		-		-		-		1		568,000		568,000
Nonresidential real estate
Owner occupied properties		-		-		-		1		1,700,000		1,700,000
Non owner occupied properties		-		-		-		-		-		-
Construction		-		-		-		-		-		-
Consumer
Credit card balances		-		-		-		-		-		-
Other consumer		-		-		-		-		-		-
Municipal obligations		-		-		-		-		-		-
Total		1	$	31,757	$	29,979		2	$	2,268,000	$	2,268,000

22

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ending September 30, 2012 and 2011:

	2012						2011
	Number Of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number Of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial		2	$	190,168	$	184,336		-	$	-	$	-
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		1		485,000		48,238		-		-		-
Other residential real estate		1		187,105		186,074		1		568,000		568,000
Nonresidential real estate
Owner occupied properties		1		153,891		153,891		1		1,700,000		1,700,000
Non owner occupied properties		-		-		-		3		10,881,848		10,839,519
Construction		5		3,204,872		2,957,005		-		-		-
Consumer
Credit card balances		-		-		-		-		-		-
Other consumer		-		-		-		-		-		-
Municipal obligations		-		-		-		-		-		-
Total		10	$	4,221,036	$	3,529,544		5	$	13,149,848	$	13,107,519

The troubled debt restructurings described above increased the allowance for loan losses by $2,871 and resulted in charge-offs of $0 during the third quarter ending September 30, 2012 and charge offs of $1,112,147 for the nine months ending September 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 during the period ending September 30, 2012:

23

Troubled Debt Restructurings
That Subsequently Defaulted:	Number of Loans		Recorded Investment
Commercial		1	$	154,357
Residential real estate
Home equity lines of credit
Multifamily properties		1		48,238
Other residential real estate		1		465,293
Nonresidential real estate
Owner occupied properties
Non owner occupied properties		3		3,234,737
Construction		2		1,616,100
Consumer
Credit card balances
Other consumer
Municipal obligations		-		-
Total		8	$	5,518,725

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 $0 and resulted in charge-offs of $477,091 during the third quarter ending September 30, 2012 and $1,739,238 for the nine months ending September 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, including: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans with an outstanding balance greater than $100,000 and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. Loans with balances below $100,000 and homogenous loans, such as residential real estate and consumer loans, are analyzed for credit quality based on aging status, which was previously presented. 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 institution will sustain some loss if the deficiencies are not corrected.

24

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

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

			Special
	Pass		Mention		Substandard		Doubtful		Not Rated(1)		Total
September 30, 2012
Commercial	$	166,935	$	10,448	$	3,787	$	-	$	-	$	181,170
Residential real estate
Home equity lines of credit		11,827		781		1,953		-		85,731		100,292
Multifamily properties		45,311		100		1,372		-		-		46,783
Other residential real estate		40,607		1,143		10,496		-		82,424		134,670
Nonresidential real estate
Owner occupied properties		248,156		10,909		19,134		-		-		278,199
Non owner occupied properties		255,141		7,304		14,590		-		-		277,035
Construction		87,924		2,264		8,421		-		-		98,609
Consumer
Credit card balances		-		-		-		-		6,497		6,497
Other consumer		-		-		19		-		9,654		9,673
Municipal obligations		27,603		-		-		-		-		27,603
Total	$	883,504	$	32,949	$	59,772	$	0	$	184,306	$	1,160,531

(1) Not rated loans represent the homogenous pools risk category.

			Special
	Pass		Mention		Substandard		Doubtful		Not Rated(1)		Total
December 31, 2011
Commercial	$	170,394	$	9,684	$	13,098	$	-	$	-	$	193,176
Residential real estate
Home equity lines of credit		-		712		976		84		92,908		94,680
Multifamily properties		36,115		103		538		-		-		36,756
Other residential real estate		38,725		1,357		10,843		-		83,907		134,832
Nonresidential real estate
Owner occupied properties		221,941		7,754		23,073		-		-		252,768
Non owner occupied properties		246,614		8,902		15,201		-		-		270,717
Construction		90,297		3,398		11,093		-		-		104,788
Consumer
Credit card balances		-		-		-		-		6,492		6,492
Other consumer		-		-		22		-		10,104		10,126
Municipal obligations		27,066		-		-		-		-		27,066
Total	$	831,152	$	31,910	$	74,844	$	84	$	193,411	$	1,131,401

(1) Not rated loans represent the homogenous pools risk category.

25

Note 10 –Fair Value:

Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Investment Securities: The fair values of securities available-for-sale are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). One corporate security is valued using Level 3 inputs as there is no readily observable market activity. Management determines the value of this security based on expected cash flows, the credit quality of the security and current market interest rates.

Derivatives: The Bank’s derivative instruments consist of over-the-counter interest-rate swaps that trade in liquid markets. The fair value of the derivative instruments is primarily measured by obtaining pricing from broker-dealers recognized to be market participants. The pricing is derived from market observable inputs that can generally be verified and do not typically involve significant judgment by the Bank. This valuation method is classified as Level 2 in the fair value hierarchy.

Impaired Loans: At the time a loan is considered impaired, it is recorded at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

26

Loans Held For Sale: Loans held for sale are carried at the lower of cost or fair value, which is evaluated on a pool-level basis. The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2).

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

			Fair Value Measurements at
			September 30, 2012 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	September 30,		Identical Assets		Inputs		Inputs
	2012		(Level 1)		(Level 2)		(Level 3)
Assets
Investment securities available-for-sale
U.S. government sponsored entities and agencies	$	113,763	$	-	$	113,763	$	-
U.S. government agency mortgage backed		187,721		-		187,721		-
Corporate		1,060		-		-		1,060
Derivatives		1,841		-		1,841		-
Total	$	304,385	$	-	$	303,325	$	1,060
Liabilities
Derivatives	$	1,841	$	-	$	1,841	$	-
Total	$	1,841	$	-	$	1,841	$	-

			Fair Value Measurements at
			December 31, 2011 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
	2011		(Level 1)		(Level 2)		(Level 3)
Assets
Investment securities available-for-sale
U.S. government sponsored entities and agencies	$	169,460		-		169,460		-
U.S. government agency mortgage backed		151,992		-		151,992		-
Corporate		1,060		-		-		1,060
Derivatives		1,349		-		1,349		-
Total	$	323,861		-		322,801		1,060
Liabilities
Derivatives	$	1,349		-		1,349		-
Total	$	1,349		-		1,349		-

27

There were no transfers between Level 1 and Level 2 during 2012 or 2011.

There were no gains or losses for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter ended September 30, 2012.

There were no changes in unrealized gains and losses recorded in earnings for the quarter ended September 30, 2012 for Level 3 assets and liabilities that are still held at September 30, 2012.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period ended September 30 (in thousands):

	Corporate Securities
	9/30/12		12/31/11
Balance of recurring Level 3 assets at January 1	$	1,060	$	1,060
Total gains or losses for the period:
Included in earnings
Included in other comprehensive income
Purchases		-		-
Sales		-		-
Issuances		-		-
Settlements		-		-
Transfers into Level 3		-		-
Transfers out of Level 3		-		-
Balance of recurring Level 3 assets at December 31	$	1,060	$	1,060

The following table presents quantitative information about recurring Level 3 fair value measurements at September 30, 2012 (in thousands):

			Valuation
	Fair value		Technique(s)	Unobservable Input(s)	Value
Corporate security	$	1,060	Discounted cash flow	Probability of default		0	%

The interest rate on this security is based on interest rates paid for securities with similar credit characteristics, but the probability of default is determined through a credit quality review rather than formal ratings or other observable inputs. The interest rate adjusts to reflect current market conditions of highly rated investments, if probability of default changed significantly, the interest rate would adjust accordingly and the fair value would be updated. Management reviews this interest rate and the security’s credit quality quarterly and a market value adjustment is made if necessary pursuant to this review.

28

Assets and Liabilities Measured on a Non-Recurring Basis

(Dollars in thousands)

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at
			September 30, 2012 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	September 30		Identical Assets		Inputs		Inputs
	2012		(Level 1)		(Level 2)		(Level 3)
Assets
Impaired loans
Commercial	$	771	$	-	$	-	$	771
Nonresidential real estate		-
Owner occupied properties		5,892		-		-		5,892
Non owner occupied properties		3,732		-		-		3,732
Residential real estate
Home equity lines of credit		147		-		-		147
Multifamily properties		1,081		-		-		1,081
Other		2,819		-		-		2,819
Construction		4,051		-		-		4,051
Total	$	18,493	$	-	$	-	$	18,493

			Fair Value Measurements at
			December 31, 2011 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	December 31		Identical Assets		Inputs		Inputs
	2011		(Level 1)		(Level 2)		(Level 3)
Assets
Impaired loans
Commercial	$	383	$	-	$	-	$	383
Nonresidential real estate		-
Owner occupied properties		8,320		-		-		8,320
Non owner occupied properties		5,858		-		375		5,483
Residential real estate
Home equity lines of credit		-		-		-		-
Multifamily properties		-		-		-		-
Other		3,332		-		1,832		1,500
Construction		3,787		-		214		3,573
Total	$	21,680	$	-	$	2,421	$	19,259

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a gross carrying amount of $24,747,000 with a valuation allowance of $6,254,000, resulting in a decrease in provision for loan losses of $1,189,000 for the first nine months of 2012. As of December 31, 2011, impaired loans had a gross carrying amount of $29,124,000, with a valuation allowance of $7,443,000, resulting in an increase in provision for loan losses of $1,699,000.

29

Values for collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure or other factors management deems relevant to arrive at a representative fair value.  Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach.  The cost method bases value on the cost to replace the current property.  The market comparison approach evaluates the sales price of similar properties in the same market area.  The income approach considers net operating income generated by the property and an investor’s required return.  The final fair value is based on a reconciliation of these three approaches.

The following table presents quantitative information about recurring Level 3 fair value measurements at September 30, 2012 (in thousands):

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Discount
Assets
Impaired Loans:
Commercial	$	875	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Nonresidential real estate
Owner occupied properties		8,255	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Non owner occupied properties		9,645	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Residential real estate
Home equity lines of credit
Multifamily properties		577	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Other		2,417	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Construction		4,470	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Total	$	26,239

30

The carrying amounts and estimated fair values of financial instruments at September 30, 2012 and December 31, 2011 are as follows (in thousands):

				Fair Value Measurements at
				September 30, 2012 Using:
	Carrying Value			Level 1			Level 2			Level 3			Total
(Dollars in thousands)
Financial assets
Cash and cash equivalents	$	81,950		$	81,950		$			$			$	81,950
Interest-bearing deposits with Banks		250						250						250
Securities available-for-sale		302,544						301,484			1,060			302,544
Securities held-to-maturity		58,314						60,375						60,375
Federal Home Loan Bank stock		5,099			N/A									N/A
Loans held for sale		19,314						19,314						19,314
Loans, net		1,142,489									1,149,104			1,149,104
Accrued interest receivable		4,428						4,428						4,428
Derivative assets		1,841						1,841						1,841
Financial liabilities
Deposits	$	(1,471,246	)	$	(1,101,443	)	$	(366,976	)	$			$	(1,468,419	)
Short-term borrowings		(22,142	)					(22,142	)					(22,142	)
Notes payable		(48,721						(22,414	)		(22,366	)		(44,780	)
Accrued interest payable		(1,082	)					(1,082	)					(1,082	)
Standby letters of credit		(208	)					(208	)					(208	)
Derivative liabilities		(1,841	)					(1,841	)					(1,841	)

				Fair Value Measurements at
				December 31, 2011 Using:
	Carrying Value			Level 1			Level 2			Level 3			Total
(Dollars in thousands)
Financial assets
Cash and cash equivalents	$	135,964		$	135,964		$			$			$	135,964
Interest-bearing deposits with Banks		250						250						250
Securities available-for-sale		322,512						321,452			1,060			322,512
Securities held-to-maturity		48,975						50,643						50,643
Federal Home Loan Bank stock		5,099			N/A									N/A
Loans held for sale		8,920						8,920						8,920
Loans, net		1,111,666						1,093,529			19,259			1,112,788
Accrued interest receivable		4,887						4,887						4,887
Derivative assets		1,349						1,349						1,349
Financial liabilities
Deposits	$	(1,498,821	)	$	(1,092,434	)	$	(408,859	)	$			$	(1,501,293	)
Short-term borrowings		(29,300	)					(29,300	)					(29,300	)
Notes payable		(48,739	)					(27,477	)		(18,476	)		(45,953	)
Accrued interest payable		(1,582	)					(1,582	)					(1,582	)
Standby letters of credit		(263	)					(263	)					(263	)
Derivative liabilities		(1,349	)					(1,349	)					(1,349	)

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The estimated fair value approximates carrying amounts for all items except those described below. The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2. Estimated fair value for both securities available-for-sale and held-to-maturity is as previously described for securities available-for-sale. It is not practicable to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability. Fair values of loans, excluding loans held for sale, are estimated as set forth below:

For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification. The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification. The carrying amounts of federal funds purchased, borrowings under repurchase agreements and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification. The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification. The fair values of the Company’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification. Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material. Estimated fair value of standby letters of credit are based on their current unearned fee balance. Estimated fair value for commitments to make loans and unused lines of credit are considered nominal. Estimated fair value for derivatives is determined as previously described above.

32

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The objective of this section is to help shareholders and potential investors understand our views on our results of operations and financial condition. You should read this discussion in conjunction with the consolidated financial statements and notes to the consolidated financial statements that appear elsewhere in this quarterly report on form 10-Q (this “Quarterly Report”). References to “we,” “us,” and “our” in this section refer to the Bank of Kentucky Financial Corporation (“BKFC”) and its subsidiaries, including The Bank of Kentucky, Inc. (“the Bank”), unless otherwise specified or unless the context otherwise requires.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this quarterly report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not limited to, projections of revenues, income or loss, earnings or loss per share, the payment or non-payment of dividends, capital structure and other financial items; statements of plans and objectives of us or our management or Board of Directors; and statements of future economic performance and statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “intends” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, the following:

· indications of an improving economy may prove to be premature;

· general economic or industry conditions could be less favorable than expected, resulting in a deterioration in credit quality, a change in the allowance for credit losses or a reduced demand for credit or fee-based products and services;

· changes or volatility in interest rates may adversely impact the value of securities, loans, deposits and other financial instruments and the interest rate sensitivity of our balance sheet as well as our liquidity;

· our ability to determine accurate values of certain assets and liabilities;

· the impact of turmoil in the financial markets and the effectiveness of governmental actions taken in response, and the effect of such governmental actions on us, our competitors and counterparties, financial markets generally and availability of credit specifically;

· changes in the extensive laws, regulations and policies governing financial services companies, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and any regulations promulgated thereunder;

33

· the potential need to adapt to industry changes in information technology systems, on which the Bank is highly dependent, could present operational issues or require significant capital spending;

· competitive pressures could intensify and affect the Bank’s profitability, including as a result of continued industry consolidation, the increased availability of financial services from non-banks, technological developments or bank regulatory reform; and

· acquisitions may not produce revenue enhancements or cost savings at levels or within timeframes originally anticipated, or may result in unforeseen integration difficulties.

Any forward-looking statements made by us or on our behalf speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances. Before making an investment decision, you should carefully consider all risks and uncertainties disclosed in our other public documents on file with the Securities and Exchange Commission (“SEC”), including those described in Item 1A of our Annual Report on Form 10-K, for the year ended December 31, 2011.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

BKFC has prepared all of the consolidated financial information in this Quarterly Report in accordance with GAAP. In preparing the consolidated financial statements in accordance with generally accepted accounting principles, BKFC makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. There can be no assurances that actual results will not differ from those estimates.

We have identified the accounting policy related to the allowance for loan losses as critical to the understanding of BKFC’s results of operations, since the application of this policy requires significant management assumptions and estimates that could result in reporting materially different amounts if conditions or underlying circumstances were to change.

The Bank maintains an allowance to absorb probable, incurred loan losses inherent in the loan portfolio. The allowance for loan losses is maintained at a level the Bank considers to be adequate and is based upon ongoing quarterly assessments and evaluations of the collectability and historical loss experience of loans. Loan losses are charged and recoveries are credited to the allowance for loan losses. Provisions for loan losses are based on the Bank’s review of its historical loan loss experience and such factors that, in management’s judgment, deserve consideration under existing economic conditions in estimating probable loan losses. The Bank’s strategy for credit risk management includes a combination of well-defined credit policies, uniform underwriting criteria and ongoing risk monitoring and review processes for all commercial and consumer credit exposures. The credit risk management strategy also includes assessments of compliance with commercial and consumer policies, risk ratings and other important credit information. The strategy also emphasizes regular credit examinations and management reviews of loans exhibiting deterioration in credit quality. The Bank strives to identify potential problem loans early and promptly undertake the appropriate actions necessary to mitigate or eliminate the increasing risk identified in these loans.

34

The allowance for loan losses consists of two components, the specific reserve, pursuant to ASC 310, Accounting by Creditors for Impairment of a Loan, and the general reserve, pursuant to ASC 450-10, Accounting for Contingencies. A loan is considered impaired when, based upon current information and events, it is probable that the bank will be unable to collect all amounts due according to the contractual terms of the loan. The specific reserve component is an estimate of loss based upon an impairment review of larger loans that are considered impaired. The general reserve includes an estimate of commercial and consumer loans with similar characteristics. Depending on the set of facts with respect to a particular loan, the Bank utilizes one of the following methods for determining the proper impairment of a loan:

· the present value of expected future cash flows of a loan;

· the market price of the loan based upon readily available information for that type of loan; and

· the fair value of collateral.

The allowance established for impaired loans is generally based, for all collateral-dependent loans, on the fair market value of the collateral, less the estimated cost to liquidate. For non-collateral dependent loans (such as accruing troubled debt restructurings), the allowance is based on the present value of expected future cash flows discounted by the loan’s effective interest rate. A portion of the Bank’s loans which are impaired under the ASC 310 process carry no specific reserve allocation. These loans were reviewed for impairment and are considered adequately collateralized with respect to their respective outstanding principal loan balances. The majority of these loans are loans which have had their respective impairment (or specific reserve) amounts charged off. It is the Bank’s practice to maintain these impaired loans, as analyzed and provided for in the ASC 310 component of the allowance for loan losses, to avoid double counting of any estimated losses that may have been included in the ASC 450-10 component of the allowance for loan losses.

Generally, the Bank orders a new or updated appraisal on real estate properties which are subject to an impairment review. Upon completion of the impairment review, loan reserves are increased as warranted. Charge-offs, if necessary, are generally recognized in a period after the reserves were established. Adjustments to new or updated appraisal values are not typical, but in those cases when an adjustment is necessary, it is documented with supporting information and typically results in an adjustment to decrease the property’s value because of additional information obtained concerning the property after the appraisal or update has been received by the Bank. If a new or updated appraisal is not available at the time of a loan’s impairment review, the Bank typically applies a discount to the value of an old appraisal to reflect the property’s current estimated value if there is believed to be deterioration in either (i) the physical or economic aspects of the subject property or (ii) any market conditions. Updated valuations on 1 to 4 family residential properties with small to moderate values are generally accomplished by obtaining an Automated Valuation Model (“AVM”) or a Broker’s Price Opinion (“BPO”). Generally, an “as is” value is utilized in most of the Bank’s real estate based impairment analyses. However, under certain limited circumstances, an “as stabilized” valuation may be utilized, provided that the “as stabilized” value is tied to a well-justified action plan to bring the real estate project to a stabilized occupancy under a reasonable period of time.

35

If a partially charged-off loan has been restructured in a manner that is reasonably assured of repayment and performance according to prudently modified terms, and has sustained historical payment performance for a reasonable period of time prior to and/or after the restructuring, it may be returned to accrual status and classified as a TDR loan. However, if the above conditions cannot be reasonably met, the loan remains on non-accrual status.

In addition, the Bank evaluates the collectability of both principal and interest when assessing the need for loans to be placed on non-accrual status. Non-accrual status denotes loans in which, in the opinion of management, the collection of additional interest is unlikely. A loan is generally placed on non-accrual status if: (i) it becomes 90 days or more past due (120 days past due for consumer loans) or (ii) for which payment in full of both principal and interest cannot be reasonably expected.

Historical loss rates are applied to all other loans not subject to specific reserve allocations. The loss rates applied to loans are derived from analyzing the loss experience sustained on loans according to their internal risk rating. These loss rates may be adjusted to account for environmental factors. The general reserve also includes homogeneous loans, such as consumer installment, residential mortgage and home equity loans that are not individually risk graded. For these loans that are not individually risk graded, the historic loss experience of the portfolio is used to determine the appropriate allowance for the portfolios. Allocations for the allowance are established for each pool of loans based on the expected net charge-offs for one year.

In the second quarter of 2012 management developed a detailed approach to setting the environmental adjustments to the historic loss rates and discontinued the use of high and low range of reserve percentages. Management believes that this more detailed approach adds efficiencies and provides more precision to the allowance for loan losses estimations. Factors that management considers as part of this approach in setting the environmental adjustments include economic trends, loan policies, lender experience, loan growth, delinquency trend, non-performing asset trends, classified loan trends and credit concentrations.

Reserves on individual loans and historical loss rates are reviewed quarterly and adjusted as necessary based on changing borrower and/or collateral conditions, as well as actual collection and charge-off experience.

Charge-offs are recognized when it becomes evident that a loan or a portion of a loan is deemed uncollectible regardless of its delinquent status. The Bank generally charges off that portion of a loan that is determined to be unsupported by an obligor’s continued ability to repay the loan from income and/or assets, both pledged and unpledged as collateral.

36

OVERVIEW

Economic Overview

Despite positive economic news in the third quarter of 2012, the overall economic recovery remains muted after a very deep recession highlighted by high unemployment, depressed real estate values and high levels of problem assets in the banking industry. The third quarter of 2012 continued to show signs of positive growth as gross domestic product expanded at an anticipated rate of 1.8% from the previous quarter, which remains well below the historical normalized 3% growth rate. For the year, the U.S. economy is anticipated to grow at 2.1% over 2011’s output. The national unemployment rate fell during the third quarter by 0.10% to 8.07%. The economy also produced 437,000 non-farm jobs in the quarter, which was a substantial recovery from the previous quarters. The expectation for the remainder of 2012 is that the U.S. economy will continue to experience muted growth. The major risks for the remainder of 2012 with respect to the overall economy will be the severity of the recession in Europe, and the impact of food and energy inflation on the consumers. Interest rates remain low as a result of the continuing actions by the Federal Reserve with respect to the target fed funds rate.

2012 Third Quarter and Nine Month Performance Overview

The Company completed the third quarter and first nine months of 2012 with a 4% and a 20% increase in diluted earnings per share respectively. These results reflect overall improving credit metrics and continued revenue growth which was offset by higher non-interest expense. In the third quarter of 2012 total loans increased $15,341,000 (1%) from the previous quarter, which was the second sequential quarter of strong organic loan growth and the largest quarterly increase that the Company has experienced in the last three years. The third quarter and first nine months of 2012 results also benefited from the elimination of the Company’s preferred stock dividends and related amortization expense as a result of the Company’s repurchase of the remaining $17 million of Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”), previously issued to the U.S. Department of the Treasury (the “U.S. Treasury”) as part of the Troubled Asset Relief Program (“TARP”) Capital Purchase Program. The 4% increase in diluted earnings per share for the third quarter of 2012 as compared to the same period in 2011 was the result of a 14% reduction in the provision for loan losses, and a 2% growth in revenue, which was offset with a 10% increase in non-interest expense as compared to the same period in 2011. The reduction in the provision for loan losses was accompanied by lower levels of problem loans from both the previous year and on a sequential basis from the second quarter of 2012. While levels of problem loans decreased, charged off loans increased from both the previous year and on a sequential basis from the second quarter. The majority of loans charged off in the third quarter of 2012 were impaired in previous quarters, which resulted in a 10% decrease in the allowance for loan losses on the balance sheet as compared to June 30, 2012.

The following sections provide more detail on subjects presented in the overview.

37

FINANCIAL CONDITION

Total assets at September 30, 2012 were $1,721,954,000 as compared to $1,744,724,000 at December 31, 2011, a decrease of $22,770,000 (1%). Cash and cash equivalents decreased $54,014,000 (40%) from $135,964,000 at December 31, 2011 to $81,950,000 at September 30, 2012. Loans outstanding increased $29,120,000 from $1,129,954,000 at December 31, 2011 to $1,159,074,000 at September 30, 2012.

As Table 1 illustrates, the increase in the loan portfolio in 2012 was the result of an increase in commercial real estate loans of $31,749,000 (6%) and residential real estate loans of $15,477,000 (6%) and was offset with a decrease in commercial loans of $12,006,000 (6%). Management expects a steady, although slow, increase in loan demand in 2012, mirroring the current economic conditions as discussed above. The Bank intends to continue to work to make loans that meet its longstanding prudent lending standards.

As discussed above, the decrease in the allowance for loan loss of $1,703,000 (9%) was the result of loans that were charged off in the third quarter of 2012 that were previously reserved for in prior quarters.

Deposits decreased $27,575,000 to $1,471,246,000 at September 30, 2012, compared to $1,498,821,000 at December 31, 2011. The largest decrease in deposits came from interest bearing transaction deposits which decreased $42,002,000, or 9% from December 31, 2011. The Bank’s interest bearing transaction accounts include public fund accounts which decreased $66,471,000 or 18% from the end of 2011. Public funds are deposits of local municipalities, schools and other public entities, and tend to be cyclical in nature with higher balances in the fourth quarter of the year as a result of property tax receipts. Also, an increase in non-interest bearing deposits of $34,456,000 or 12% was offset with a $38,654,000, or 11%, decrease in certificates of deposits (CDs). Management believes the decrease in certificates of deposits is a result of the low rate environment.

Table 1 Composition of the Bank’s loans and deposits at the dates indicated:

	September 30, 2012					December 31, 2011
	Amount		%			Amount		%
	(Dollars in thousands)
Type of Loan:
Commercial real estate loans	$	555,234		47.8	%	$	523,485		46.3	%
One- to four-family residential real estate loans		281,745		24.3			266,268		23.5
Commercial loans		181,170		15.6			193,176		17.1
Consumer loans		16,170		1.4			16,618		1.5
Construction and land development loans		98,609		8.5			104,788		9.2
Municipal obligations		27,603		2.4			27,066		2.4
Total loans	$	1,160,531		100.0	%	$	1,131,401		100.0	%
Less:
Deferred loan fees		1,457					1,447
Allowance for loan losses		16,585					18,288
Net loans	$	1,142,489				$	1,111,666
Type of Deposit:
Non-interest bearing deposits	$	317,546		21.58	%	$	283,090		18.9	%
Interest bearing transaction deposits		418,572		28.45			460,574		30.7
Money market deposits		252,287		17.15			250,051		16.7
Savings deposits		117,407		7.98			96,247		6.4
Certificates of deposits		304,070		20.67			342,724		22.9
Individual retirement accounts		61,364		4.17			66,135		4.4
Total Deposits	$	1,471,246		100.0	%	$	1,498,821		100.0	%

38

RESULTS OF OPERATIONS

GENERAL

Net income available to common shareholders for the nine months ended September 30, 2012 increased from $10,803,000 ($1.45 diluted earnings per share) in 2011 to $13,135,000 ($1.74 diluted earnings per share) in 2012, an increase of $2,332,000 (22%). Net income available to common shareholders for the quarter ended September 30, 2012 was $4,196,000 ($.56 diluted earnings per share) as compared to $4,013,000 ($.54 diluted earnings per share) during the same period of 2011, an increase of $183,000 (5%). The primary reason for the increase in net income from the third quarter of 2011 as compared to the third quarter of 2012 was a $350,000 (14%) decrease in the provision for loan losses, which was reflective of overall improving credit metrics as compared to the third quarter of 2011. Additionally, total revenue increased by $450,000 (2%), which was offset by non-interest expense, which increased by $1,072,000 (10%) for the third quarter of 2012 as compared to the same period of 2011. As described above in the section entitled “Overview”, the third quarter 2012 results also reflect a decrease of $261,000 in preferred stock dividends and amortization resulting from the repurchase of the Company’s Series A Preferred Stock from the U.S. Treasury. The increase in revenue for the third quarter of 2012 as compared to the third quarter of 2011 included a $564,000 (11%) increase in non-interest income, which was offset by a $114,000 (1%) decrease in net interest income. Contributing to the increase in non-interest income were gains on the sale of real estate loans, which increased $214,000 (30%) and trust fee income which increased $80,000 (13%) from the third quarter of 2011, which were partially offset by a $145,000 (6%) decrease in service charges and fees in the same time period. Contributing to the increase in non-interest expense was a $558,000 (10%) increase in salaries and benefits expense. Contributing to the decrease in the provision for loan losses were lower non-performing loans, lower adversely classified loans and lower impaired loan reserves in the third quarter of 2012 versus the same period in 2011.

NET INTEREST INCOME

Net interest income decreased $114,000 (1%) in the third quarter of 2012 as compared to the same period in 2011, while the year to date total increased $402,000 (1%) from $41,451,000 in 2011 to $41,853,000 in 2012. As illustrated in Table 2, average earning assets increased $70,577,000 or 5% from the third quarter of 2011 to the third quarter of 2012, while average interest bearing liabilities only increased $41,458,000 or 3% in the same period. Table 4 shows that the net interest income on a fully tax equivalent basis was positively impacted by the volume additions to the balance sheet by $717,000, which was offset with a negative rate variance of $826,000. As further illustrated in Table 4, contributing to the favorable volume variance was the increase in interest income attributable to securities of $242,000. Driving the increase in interest income from securities was a $45,563,000 or 14% increase in the average balance of securities outstanding from the third quarter of 2011 to the third quarter of 2012.

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As illustrated in Table 2, the cost of interest bearing liabilities is .47%, while the yield on earning assets is 4.02%. With the cost of interest bearing liabilities approaching “floor” levels, if rates were to continue to fall, the effect on the Company is expected to be negative, as shown and explained below.

As illustrated in Table 2 below, the net interest margin of 3.64% for the third quarter of 2012 was 19 basis points lower than the 3.83% net interest margin for the third quarter of 2011. The cost of interest-bearing liabilities decreased 26 basis points from .73% for the third quarter of 2011 to ..47% in the third quarter of 2012, while the yield on earning assets decreased 40 basis points from 4.42% for the third quarter of 2011 to 4.02% for the third quarter of 2012. Contributing to the decrease in the net interest margin from the third quarter of 2011 was the mix of earning assets. The average balance in securities, which yielded 1.90% in the third quarter of 2012, increased on average $45,563,000 (14%) from the third quarter of 2011, while the average balance in loans, which yielded 4.78% in the third quarter of 2012, increased by only $31,954,000 (3%) from the third quarter of 2011.

The Company uses an earnings simulation model to estimate and evaluate the impact of changing interest rates on earnings. The model projects the effect of instantaneous movements in interest rates of both 100 and 200 basis points. By simulating the effects of movements in interest rates, the model can estimate the Company’s interest rate exposure. The results of the model are used by management to approximate the results of rate changes and do not indicate actual expected results. As shown below, the September 30, 2012 simulation analysis indicates that the Company is in a slightly liability interest rate sensitive position, with the net interest income negatively impacted by rising rates. As a result of the current historically low rate environment, the effects of a 100 basis point decrease in rates would also be negative to the net interest income. This is the result of a significant portion of the interest-bearing liabilities already having a cost below 1.00%.

Net interest income estimates are summarized below.

	Net Interest Income Change
Increase 200 bp		(1.01	)%
Increase 100 bp		(0.79	)
Decrease 100 bp		(3.64	)

Table 2 & 3 below set forth certain information relating to the Bank’s average balance sheet information and reflects the average yield on interest-earning assets, on a tax equivalent basis, and the average cost of interest-bearing liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average monthly balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods presented. Average balances are daily averages for the Bank and include non-accruing loans in the loan portfolio, net of the allowance for loan losses.

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Table 2- Average Balance Sheet Rates for Three Months Ended September 30, 2012 and 2011 (presented on a tax equivalent basis in thousands)

	Three Months ended September 30, 2012								Three Months ended September 30, 2011
	Average outstanding balance			Interest earned/ paid		Yield/ rate			Average outstanding balance			Interest earned/ paid		Yield/ rate
Interest-earning assets:
Loans receivable (1)(2)	$	1,158,072		$	13,926		4.78	%	$	1,126,118		$	14,652		5.16	%
Securities (2)		369,707			1,763		1.90			324,144			1,881		2.30
Other interest-earning assets		32,781			71		0.86			39,721			69		0.69
Total interest-earning assets		1,560,560			15,760		4.02			1,489,983			16,602		4.42
Non-interest-earning assets		147,283								133,736
Total assets	$	1,707,843							$	1,623,719
Interest-bearing liabilities:
Transaction accounts		796,346			418		0.21			711,046			524		0.29
Time deposits		369,327			796		0.86			411,193			1,430		1.38
Borrowings		70,445			257		1.45			72,421			250		1.37
Total interest-bearing liabilities		1,236,118			1,471		0.47			1,194,660			2,204		0.73
Non-interest-bearing liabilities		305,689								261,219
Total liabilities		1,541,807								1,455,879
Shareholders’ equity		166,036								167,840
Total liabilities and shareholders’ equity	$	1,707,843							$	1,623,719
Net interest income				$	14,289							$	14,398
Interest rate spread							3.55	%							3.69	%
Net interest margin (net interest income as a percent of average interest-earning assets)							3.64	%							3.83	%
Effect of net free funds (earning assets funded by non- interest bearing liabilities)							0.09	%							0.14	%
Average interest-earning assets to interest-bearing liabilities		126.25	%							124.72	%

(1) Includes non-accrual loans.

(2) Income presented on a tax equivalent basis using a 35.00% tax rate in 2012 and 2011, respectively. The tax equivalent adjustment was $327,000 and $322,000 in 2012 and 2011, respectively.

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Table 3- Average Balance Sheet Rates for Nine Months Ended September 30, 2012 and 2011 (presented on a tax equivalent basis in thousands)

	Nine Months ended September 30, 2012								Nine Months ended September 30, 2011
	Average outstanding balance			Interest earned/ paid		Yield/ rate			Average outstanding balance			Interest earned/ paid		Yield/ rate
Interest-earning assets:
Loans receivable (1)(2)	$	1,142,833		$	41,832		4.89	%	$	1,118,185		$	43,886		5.25	%
Securities (2)		373,036			5,684		2.04			315,364			5,454		2.31
Other interest-earning assets		63,895			242		0.51			69,341			291		0.56
Total interest-earning assets		1,579,764			47,758		4.04			1,502,890			49,631		4.40
Non-interest-earning assets		148,025								132,355
Total assets	$	1,727,789							$	1,635,245
Interest-bearing liabilities:
Transaction accounts		810,382			1,313		0.22			720,339			1,708		0.32
Time deposits		384,549			2,815		0.98			424,428			4,785		1.51
Borrowings		75,657			801		1.41			72,879			758		1.39
Total interest-bearing liabilities		1,270,588			4,929		0.52			1,217,646			7,251		0.80
Non-interest-bearing liabilities		295,194								252,033
Total liabilities		1,565,782								1,469,679
Shareholders’ equity		162,007								165,566
Total liabilities and shareholders’ equity	$	1,727,789							$	1,635,245
Net interest income				$	42,829							$	42,380
Interest rate spread							3.52	%							3.60	%
Net interest margin (net interest income as a percent of average interest-earning assets)							3.62	%							3.72	%
Effect of net free funds (earning assets funded by non-interest bearing liabilities)							0.10	%							0.12	%
Average interest-earning assets to interest-bearing liabilities		124.33	%							123.43	%

___________________________

(1) Includes non-accrual loans.

(2) Income presented on a tax equivalent basis using a 35.00% tax rate in 2012 and 2011, respectively. The tax equivalent adjustment was $976,000 and $929,000 in 2012 and 2011, respectively.

Table 4 below illustrates the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities have affected the Bank’s interest income and expense during the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (change in volume multiplied by prior year rate), (ii) changes in rate (change in rate multiplied by prior year volume) and (iii) total changes in rate and volume. The combined effects of changes in both volume and rate, which cannot be separately identified, have been allocated proportionately to the change due to volume and the change due to rate.

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Table 4-Volume/Rate Analysis (in thousands)

	Three months ended September 30, 2012 Compared to Three months ended September 30, 2011									Nine months ended September 30, 2012 Compared to Nine months ended September 30, 2011
	Increase (Decrease) Due to									Increase (Decrease) Due to
	Volume			Rate			Total			Volume			Rate			Total
Interest income attributable to:
Loans receivable	$	404		$	(1,130	)	$	(726	)	$	954		$	(3,008	)	$	(2,054	)
Securities		242			(360	)		(118	)		928			(698	)		230
Other interest-earning assets(1)		(13	)		15			2			(22	)		(27	)		(49	)
Total interest-earning assets		633			(1,475	)		(842	)		1,860			(3,733	)		(1,873	)
Interest expense attributable to:
Transactions accounts		57			(300	)		(243	)		194			(727	)		(533	)
Time deposits		(133	)		(362	)		(495	)		(418	)		(1,414	)		(1,832	)
Borrowings		(7	)		14			7			29			14			43
Total interest-bearing liabilities		(83	)		(648	)		(731	)		(195	)		(2,127	)		(2,322	)
Increase (decrease) in net interest income	$	716		$	(827	)	$	(111	)	$	2,055		$	(1,606	)	$	449

(1) Includes federal funds sold and interest-bearing deposits in other financial institutions.

PROVISION FOR LOAN LOSSES

Like many other financial institutions, the Bank has been significantly affected by the national economic downturn that began over four years ago. While the Bank has experienced an increase in defaults and foreclosures in this economic period, the levels of such activity have been significantly less than other regions in the country due, in part, to the fact that the Bank’s market in the northern Kentucky and greater Cincinnati area did not experience as dramatic a rise in real estate values over the last several years as other markets.

Although the Bank is seeing the benefit of the current slow economic recovery, management believes that with the continuing economic uncertainty, high unemployment rates and low real estate values, the resulting pressure on earnings will remain above historical levels. This will include continuing higher than historic levels of charge-offs in the loan portfolio and, as a result, higher provisions for loan losses and a higher reserve for loan losses on the balance sheet. Higher provisions for loan losses will lead to lower earnings and slower capital growth. Management believes that loan growth experienced in the third quarter of 2012 is consistent with the slowly improving economic conditions, and management anticipates slowly growing demand for loans in the coming quarters.

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As discussed above, the provision for loan losses for the third quarter of 2012 reflected slowly improving economic conditions. Although the credit metrics have deteriorated significantly since the beginning of the current economic downturn, there are signs of improvement which have allowed provision expense to decrease from its previous levels. The provision for loan losses was $2,200,000 for the third quarter of 2012, compared to $2,550,000 for the same period in 2011 while the year to date total in 2012 was $5,700,000 versus $8,550,000 in 2011. The decrease of $350,000 (14%) in the third quarter reflected a decrease in the non-performing loans, adversely classified loans and impaired loan reserves in the third quarter of 2012 as compared to the same period in 2011. While overall credit metrics show improvement, the charged off loans in the third quarter of 2012 was higher than both the third quarter of 2011 and the second quarter of 2012. As discussed above the majority of loans charged off in the third quarter of 2012 were reserved for in previous quarters, and as a result the specific reserves for impaired loans decreased $1,508,000 from the third quarter of 2011 and $1,262,000 from the second quarter of 2012. For the third quarter of 2012, net charge-offs were $3,961,000 or 1.39% of average loan balances compared to 2011 figures of $2,425,000 or 0.86% of average loan balances. As illustrated in Table 6 below, total non-accrual loans plus loans past due 90 days or more were $14,918,000 (1.29% of loans outstanding) at September 30, 2012, compared to $16,009,000 (1.43% of loans outstanding) at September 30, 2011. Management’s evaluation of the inherent risk in the loan portfolio considers both historic losses and information regarding specific borrowers. Management continues to monitor the non-performing relationships and has established appropriate reserves.

On a sequential quarterly basis, the provision for loan losses increased $500,000 or 29% from the second quarter of 2012. Contributing to this increase was specific loan reserves added for two loan relationships which were partially offset with lower levels of non-performing loans and adversely classified loans as compared to the end of the second quarter of 2012. Also, as detailed below total classified loans decreased $14,118,000 or 13% from December 31, 2011. On a sequential basis, total classified loans decreased $15,602,000 or 14% from June 30, 2012.

The aggregate amounts of the Bank’s classified assets at September 30, 2012 and December 31, 2011 were as follows:

	9/30/12		12/31/11
	(Dollars in thousands)
Special mention (risk rating 6)	$	32,949	$	31,910
Substandard (risk rating 7 & 8)		59,771		74,844
Doubtful (risk rating 9)		0		84
Total classified assets	$	92,720	$	106,838

Non-performing assets, which include non-performing loans, other real estate owned (“OREO”) and repossessed assets, totaled $21,110,000 at September 30, 2012 versus $17,903,000 at September 30, 2011. This represents 1.23% of total assets at September 30, 2012 compared to 1.11% at September 30, 2011. The main increase in non-performing assets was in OREO balances which increased from $1,894,000 at September 30, 2011 to $6,192,000 at September 30, 2012. This increase was primarily the result of one commercial real estate relationship that added $3,475,000 in OREO in the fourth quarter of 2011. These properties are initially recorded at their fair value less estimated costs to sell with the difference between this value and the loan balance being recorded as a charge-off. On a sequential quarterly basis OREO balances increased $242,000 or 4% as new repossessed assets outpaced sales of existing properties.

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Accruing Troubled Debt Restructurings (TDRs). In certain circumstances, the Bank may modify the terms of a loan to maximize the collection of amounts due. In cases where the borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term, concessionary modification is granted to minimize or eliminate the economic loss and to avoid foreclosure or repossession of the collateral. Modifications may include interest rate reductions, extension of the maturity date or a reduction in the principal balance. Restructured loans accrue interest as long as the borrower complies with the revised terms. Total accruing TDRs were $12,270,000 at September 30, 2012 versus $13,108,000 at September 30, 2011. The Bank expects higher than normal levels of TDRs as the Bank continues to work with relationships that show signs of stress, in order to proactively manage and resolve problem loans.

Allowance for Loan Losses (“ALL”). As discussed above, the decrease in the ALL was the result of higher levels of charge offs which was offset by lower levels of specific loan reserves and lower levels of adversely classified loans. Management believes this is directionally consistent in the third quarter of 2012 with the change in the credit metrics and the continued uncertain economic conditions experienced since December 31, 2011. The ALL decreased $1,703,000 (9%) from $18,288,000 at December 31, 2011 to $16,585,000 at September 30, 2012, which decreased the allowance for loan losses as a percentage of total loans from 1.62% at December 31, 2011 to 1.43% at September 30, 2012. The amount of the allowance allocated to impaired loans at the end of the third quarter of 2012, was $6,254,000, which was down $1,189,000 from $7,443,000 at December 31, 2011. The impairment process is described in the “Critical Accounting Policies and Estimates” section of this Quarterly Report. Management believes the current level of the ALL is sufficient to absorb probable incurred losses in the loan portfolio. Management continues to monitor the loan portfolio closely and believes the provision for loan losses is directionally consistent with the changes in the probable losses inherent in the loan portfolio from the year end of 2011 to the third quarter of 2012. The Bank does not originate or purchase sub-prime loans for its portfolio. Management will continue to monitor and evaluate the effects of the current housing market conditions and any signs of further deterioration in credit quality on the Bank’s loan portfolio. Management believes the current economic strains will continue throughout 2012 and expects continuing higher than normal credit losses and provisioning expense in the foreseeable future.

Monitoring loan quality and maintaining an adequate allowance is an ongoing process overseen by senior management and the loan review function. On at least a quarterly basis, a formal analysis of the adequacy of the ALL is prepared and reviewed by management and the Company’s Board of Directors. This analysis serves as a point in time assessment of the level of the ALL and serves as a basis for provisions for loan losses. The loan quality monitoring process includes assigning loan grades and the use of a watch list to identify loans of concern.

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The following tables set forth an analysis of certain credit risk information for the periods indicated:

Table 5-Summary of Loan Loss Experience and Allowance for Loan Loss Analysis (in thousands)

	Three Months ended September 30,						Nine Months ended September 30,
	2012			2011			2012			2011
Balance of allowance at beginning of period	$	18,346		$	17,816		$	18,288		$	17,368
Recoveries of loans previously charged off:
Commercial loans		203			46			215			88
Consumer loans		73			93			250			307
Mortgage loans		2			0			9			21
Total recoveries		278			139			474			416
Loans charged off:
Commercial loans		2,724			2,139			5,409			7,070
Consumer loans		726			354			1,290			999
Mortgage loans		789			71			1,178			324
Total charge-offs		4,239			2,564			7,877			8,393
Net charge-offs		(3,961	)		(2,425	)		(7,403	)		(7,977	)
Provision for loan losses		2,200			2,550			5,700			8,550
Balance of allowance at end of period	$	16,585		$	17,941		$	16,585		$	17,941
Net charge-offs to average loans outstanding for period		1.39	%		0.86	%		0.87	%		0.95	%
Allowance at end of period to loans at end of period		1.43	%		1.60	%		1.43	%		1.60	%
Allowance to non-performing loans at end of period		112	%		112	%		112	%		112	%

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Table 6 - Analysis of non-performing loans for the periods indicated (in thousands)

	September 30,			December 31,
	2012			2011
Loans accounted for on a non-accrual basis:
Nonresidential real estate	$	7,673		$	6,628
Residential real estate		4,492			5,325
Construction		1,601			1,897
Commercial		968			1,175
Consumer and other		79			626
Total		14,813			15,651
Accruing loans which are contractually past due 90 days or more:
Nonresidential real estate	$	-		$	-
Residential real estate		39			112
Construction		-			-
Commercial		-			74
Consumer and other loans		66			33
Total		105			219
Total non-performing loans	$	14,918		$	15,870
Non-performing loans as a percentage of total loans		1.29	%		1.40	%
Accruing restructured loans (TDRs)	$	12,270		$	13,306
Non-accruing restructured loans (TDRs)	$	4,860		$	1,923
Other real estate owned	$	6,192		$	5,844

NON-INTEREST INCOME

Table 7-Major components of non-interest income (in thousands)

	Three Months ended September 30,						Nine Months ended September 30,
	2012			2011			2012			2011
Non-interest income:
Service charges and fees	$	2,325		$	2,470		$	6,767		$	7,051
Net securities gains		-			-			203			231
Mortgage banking income		917			704			2,092			1,209
Trust fee income		710			630			2,093			2,016
Bankcard transaction revenue		940			848			2,794			2,497
Company owned life insurance earnings		300			306			910			842
Gain/(loss) on other real estate owned		(73	)		(98	)		(201	)		(176	)
Other		742			437			2,162			1,524
Total non-interest income	$	5,861		$	5,297		$	16,820		$	15,194

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As illustrated in Table 7, total non-interest income increased $1,626,000 (11%) for the first nine months of 2012, from $15,194,000 at September 30, 2011 to $16,820,000 at September 30, 2012. For the third quarter of 2012, non-interest income increased $564,000 (11%) to $5,861,000 compared to $5,297,000 for the same period in 2011. Contributing to the increase for the first nine months ended September 30, 2012 was an $883,000 (73%) increase in mortgage banking income. These gains were driven by a decrease in interest rates from the third quarter of 2011, which prompted increased demand for home mortgage loan refinancing. Other increases for the nine months ended September 30, 2012, included bankcard transaction revenue (up $297,000 or 12% from September 30, 2011) and earnings from company owned life insurance (up $68,000 or 8% from September 30, 2011), which were offset by lower service charges and fees on deposits (down $284,000 or 4% from September 30, 2011). Contributing to the increase in company owned life insurance was the purchase of $6,500,000 in additional policies in 2011. The Bank also took advantage of the current low interest rate environment to sell approximately $7,000,000 of available-for-sale mortgage backed securities for a $203,000 gain. The Bank’s available-for-sale security portfolio is made up of high quality government sponsored agency bonds which are implicitly guaranteed by the U.S. Treasury and therefore their credit quality was not negatively affected by the current economic recession. The increase in bankcard transaction revenue reflected consumers continued acceptance of electronic forms of payment and the resulting growth in usage of the Bank’s debit and credit card products. The Dodd-Frank Act excluded banks under $10 billion in assets from the rule that limits the interchange fees that merchants pay to banks for certain debit card transactions.

NON-INTEREST EXPENSE

Table 8-Major components of non-interest expense (in thousands)

	Three Months ended September 30,				Nine Months ended September 30,
	2012		2011		2012		2011
Non-interest expense:
Salaries and benefits	$	5,909	$	5,351	$	17,084	$	15,150
Occupancy and equipment		1,316		1,216		3,908		3,705
Data processing		505		500		1,573		1,461
Advertising		377		464		1,146		1,186
Electronic banking		410		348		1,150		993
Outside servicing fees		258		294		788		806
State bank taxes		579		550		1,717		1,636
Other real estate owned and loan collection		279		373		1,219		1,099
Amortization of intangible assets		187		202		583		638
FDIC insurance		266		269		867		1,236
Other		1,713		1,160		4,633		3,801
Total non-interest expense	$	11,799	$	10,727	$	34,668	$	31,711

As illustrated in Table 8 above, non-interest expense increased to $34,668,000 in the first nine months of 2012, from $31,711,000 in the same period of 2011, an increase of $2,957,000 (9%). For the third quarter of 2012, non-interest expense increased $1,072,000 (10%) to $11,799,000 compared to $10,727,000 for the same period in 2011. Contributing to the increase in non-interest expense in the first nine months of 2012 were salaries and benefits expense (up $1,934,000 or 13% from September 30, 2011), and occupancy expense (up $203,000 or 5% from September 30, 2011) which were partially offset with a decrease in FDIC insurance expense (down $369,000 or 30% from September 30, 2011) in the first nine months of 2012 compared to the same period in 2011. The decrease in FDIC insurance expense was a result of recent rule changes adopted under the Dodd-Frank Act that base FDIC insurance premium assessments on total assets instead of deposits. The increase in salaries and benefits in 2012 included approximately $241,000 in higher bonus accruals and $426,000 in higher commission expense. The added bonus accrual reflects the end of the TARP restriction on bonus pay for executives, while the increased commission expense included higher commissions paid for the higher gains on the sale of real estate loans.

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INCOME TAX EXPENSE

During the first nine months of 2012, income tax expense increased $366,000 (8%) from $4,804,000 in the first nine months of 2011 to $5,170,000 in the same period of 2012 as a result of higher earnings. During the third quarter of 2012, income tax expense decreased $194,000 (11%) from $1,822,000 in the third quarter of 2011 to $1,628,000 in the same period of 2012 as a result of lower earnings and additional tax credit investments. For the third quarter of 2012, the effective tax rate decreased to 27.95% compared to 29.88% for the same period of 2011. The effective tax rate decreased to 28.24% for the first nine months of 2012 compared to 29.32% for the same period in 2011. Contributing to the decrease in the effective tax rates was an increase in tax free income and added tax credit investments as compared to 2011.

LIQUIDITY AND CAPITAL RESOURCES

The Bank achieves liquidity by maintaining an appropriate balance between its sources and uses of funds to assure that sufficient funds are available to meet loan demands and deposit fluctuations. As indicated on the statement of cash flows, cash and cash equivalents have decreased $54,014,000, from $135,964,000 at December 31, 2011 to $81,950,000 at September 30, 2012.

The Company’s total shareholders’ equity increased $11,051,000 from $156,570,000 at December 31, 2011 to $167,621,000 at September 30, 2012. In the first nine months of 2012, the Company paid a cash dividend of $.62 per share totaling $4,624,000 to common shareholders.

The Company’s liquidity depends primarily on the dividends paid to it as the sole shareholder of the Bank and the Company’s cash on hand. The Company needs liquidity to meet its financial obligations under certain subordinated debentures issued by the Company in connection with the issuance of trust preferred securities issued by the Company’s unconsolidated subsidiary, for the payment of dividends to common shareholders and for general operating expenses. The Board of Governors of the Federal Reserve System and the FDIC have legal requirements, which provide that insured banks and bank holding companies should generally only pay dividends out of current operating earnings. The FDIC prohibits the payment of any dividend by a bank that would constitute an unsafe or unsound practice. Compliance with the minimum capital requirements limits the amounts that the Company and the Bank can pay as dividends. At September 30, 2012, the Bank had capital in excess of the FDIC’s most restrictive minimum capital requirements in an amount over $47,632,000 from which dividends could be paid, subject to the FDIC’s general safety and soundness review and state banking regulations.

For purposes of determining a bank’s deposit insurance assessment, the FDIC has issued regulations that define a "well capitalized" bank as one with a leverage ratio of 5% or more and a total risk-based capital ratio of 10% or more. At September 30, 2012, the Bank's leverage and total risk-based capital ratios were 9.07% and 13.38%, respectively, which exceed the well-capitalized thresholds.

49

In 2009, the Company filed a universal shelf registration statement on Form S-3 that was declared effective in November 2010. This registration statement permits the Company to engage in offerings of up to $50 million aggregate principal amount of debt securities, common stock, preferred stock, purchase contracts, units, warrants, rights and any combination of the foregoing. The Company utilized the shelf registration to offer common stock in connection with the $28.1 million common stock offering completed in November 2010. As of the date of this quarterly report, $21.9 million of unused capacity remains available for future use. We may in the future utilize the unused portion of our existing shelf registration statement, or any future registration statements that we may file with the SEC, to conduct subsequent registered debt or equity offerings.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

There have been no significant changes to the Bank’s contractual obligations or off-balance sheet arrangements since December 31, 2011. For additional information regarding the Bank’s contractual obligations and off-balance sheet arrangements, refer to the Company’s Form 10-K for the year ending December 31, 2011.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There has been no material change in market risk since December 31, 2011. For information regarding the Company’s market risk, refer to the Company’s Form 10-K for the year ending December 31, 2011. Market risk is discussed further under the heading “Net Interest Income” above.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Disclosure controls and procedures are the Company’s controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be included in the reports filed or submitted under the Exchange Act is accumulated and communicated to Management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision, and with the participation of Management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of the disclosure controls and procedures as of September 30, 2012, and, based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective to ensure that information requiring disclosure is communicated to Management in a timely manner and reported within the timeframe specified by the SEC’s rules and forms.

50

Changes in Internal Control Over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred in the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Bank of Kentucky Financial Corporation

PART II OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company and the Bank are involved in litigation incidental to the conduct of business, but neither the Company nor the Bank is presently involved in any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on the Company.

Item 1A. Risk Factors

There have been no material changes in the Company’s risk factors from those previously disclosed in the Company’s Form 10-K for the year ended December 31, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits

Exhibit Number	Description
31.1	Rule 13a – 14(a) Certification of Robert W. Zapp
31.2	Rule 13a – 14(a) Certification of Martin J. Gerrety
32.1	Section 1350 Certification of Robert W. Zapp
32.2	Section 1350 Certification of Martin J. Gerrety
101.INS	XBRL Instance Document*

51

101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase*
101.LAB	XBRL Taxonomy Extension Label Linkbase*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase*
101.DEF	XBRL Taxonomy Extension Definition Linkbase*

*As provided in Rule 406T of Regulation S-T, this interactive data file shall not be deemed “filed” for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liability under those sections.

52

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	The Bank of Kentucky Financial Corporation
Date:	November 6, 2012	/s/ Robert W. Zapp
		Robert W. Zapp
		President and Chief Executive Officer
		(principal executive officer)
Date:	November 6, 2012_	/s/ Martin J.Gerrety
		Martin J. Gerrety
		Treasurer and Assistant Secretary
		(principal financial officer)

53

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

CERTIFICATIONS FOR QUARTERLY REPORT ON FORM 10-Q

I, Robert W. Zapp, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Bank of Kentucky Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Robert W. Zapp

Robert W. Zapp

President and Chief Executive Officer

(principal executive officer)

Date: November 6, 2012

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

CERTIFICATIONS FOR QUARTERLY REPORT ON FORM 10-Q

I, Martin J. Gerrety, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Bank of Kentucky Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Martin J. Gerrety

Martin J. Gerrety

Treasurer and Assistant Secretary

(principal financial officer)

Date: November 6, 2012

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of The Bank of Kentucky Financial Corporation (the "Company") on Form 10-Q for the period ended September 30, 2012, as filed with the Securities and Exchange Commission on the date of this Certification (the "Report"), I, Robert W. Zapp, the President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert W. Zapp

Robert W. Zapp

President and Chief Executive Officer

(principal executive officer)

Date: November 6, 2012

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of The Bank of Kentucky Financial Corporation (the "Company") on Form 10-Q for the period ended September 30, 2012, as filed with the Securities and Exchange Commission on the date of this Certification (the "Report"), I, Martin J. Gerrety, the Treasurer and Assistant Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief that:

1. The Report complies fully with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Martin J. Gerrety

Martin J. Gerrety

Treasurer and Assistant Secretary

(principal financial officer)

Date: November 6, 2012

XML

Loans by Class Modified as Troubled Debt Restructurings for which there was Payment Default within Twelve Months following Modification (Detail) (USD $)	Sep. 30, 2012
Troubled Debt Restructuring, Debtor, Subsequent Periods [Line Items]
Number of Loans	12
Recorded Investment	$ 5,518,725
Commercial [Member]
Troubled Debt Restructuring, Debtor, Subsequent Periods [Line Items]
Number of Loans	1
Recorded Investment	154,357
Residential Real Estate [Member] | Residential Real Estate Other Financing Receivable [Member]
Troubled Debt Restructuring, Debtor, Subsequent Periods [Line Items]
Number of Loans	1
Recorded Investment	465,293
Residential Real Estate [Member] | Multi Family [Member]
Troubled Debt Restructuring, Debtor, Subsequent Periods [Line Items]
Number of Loans	1
Recorded Investment	48,238
Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member]
Troubled Debt Restructuring, Debtor, Subsequent Periods [Line Items]
Number of Loans	3
Recorded Investment	3,234,737
Construction [Member]
Troubled Debt Restructuring, Debtor, Subsequent Periods [Line Items]
Number of Loans	2
Recorded Investment	1,616,100
Municipal Obligations [Member]
Troubled Debt Restructuring, Debtor, Subsequent Periods [Line Items]
Number of Loans	0
Recorded Investment	$ 0

XML

Carrying Amounts and Estimated Fair Values of Financial Instruments (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 81,950	$ 135,964
Interest-bearing deposits with Banks	250	250
Securities available-for-sale	302,544	322,512
Securities held-to-maturity	60,375	50,643
Federal Home Loan Bank stock	0
Loans held for sale	19,314	8,920
Loans, net	1,149,104	1,112,788
Accrued interest receivable	4,428	4,887
Derivative assets	1,841	1,349
Financial liabilities
Deposits	(1,468,419)	(1,501,293)
Short-term borrowings	(22,142)	(29,300)
Notes payable	(44,780)	(45,953)
Accrued interest payable	(1,082)	(1,582)
Standby letters of credit	(208)	(263)
Derivative liabilities	(1,841)
Derivatives	1,841	1,349
Carrying Value [Member]
Assets
Cash and cash equivalents	81,950	135,964
Interest-bearing deposits with Banks	250	250
Securities available-for-sale	302,544	322,512
Securities held-to-maturity	58,314	48,975
Federal Home Loan Bank stock	5,099	5,099
Loans held for sale	19,314	8,920
Loans, net	1,142,489	1,111,666
Accrued interest receivable	4,428	4,887
Derivative assets	1,841	1,349
Financial liabilities
Deposits	(1,471,246)	(1,498,821)
Short-term borrowings	(22,142)	(29,300)
Notes payable	48,721	(48,739)
Accrued interest payable	(1,082)	(1,582)
Standby letters of credit	(208)	(263)
Derivative liabilities	(1,841)
Derivatives		(1,349)
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets
Cash and cash equivalents	81,950	135,964
Financial liabilities
Deposits	(1,101,443)	(1,092,434)
Notes payable	(22,366)
Significant Other Observable Inputs (Level 2) [Member]
Assets
Cash and cash equivalents	0
Interest-bearing deposits with Banks	250	250
Securities available-for-sale	301,484	321,452
Securities held-to-maturity	60,375	50,643
Loans held for sale	19,314	8,920
Loans, net		1,093,529
Accrued interest receivable	4,428	4,887
Derivative assets	1,841	1,349
Financial liabilities
Deposits	(366,976)	(408,859)
Short-term borrowings	(22,142)	(29,300)
Notes payable	(22,414)	(27,477)
Accrued interest payable	(1,082)	(1,582)
Standby letters of credit	(208)	(263)
Derivative liabilities	(1,841)
Derivatives		(1,349)
Significant Unobservable Inputs (Level 3) [Member]
Assets
Securities available-for-sale	1,060	1,060
Federal Home Loan Bank stock	0
Loans, net	1,149,104	19,259
Financial liabilities
Notes payable	$ (22,366)	$ (18,476)

XML

Loan Balances (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 1,160,531	$ 1,131,401
Less: Deferred loan origination fees and discount	(1,457)	(1,447)
Less: Allowance for loan losses	(16,585)	(18,288)
Net loans	1,142,489	1,111,666
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	181,170	193,176
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	281,745	266,268
Nonresidential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	555,234	523,485
Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	98,609	104,788
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	16,170	16,618
Municipal Obligations [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 27,603	$ 27,066

XML

Stock-Based Compensation - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option and incentive plan, maximum issuable shares	1,000,000		1,000,000
Stock option and incentive plan, options granted to employees vesting period			5 years
Stock option expense	$ 24,000	$ 51,000	$ 76,000	$ 152,000
Stock option expense, net of tax	24,000	51,000	76,000	152,000
Restricted Stock or Unit Expense	36,000,000		36,000,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	$ 84,000,000		$ 84,000,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition			7 months

XML

Reconciliation of Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs Level Three (Detail) (Corporate Securities [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Corporate Securities [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Balance of recurring Level 3 assets at January 1	$ 1,060	$ 1,060
Purchases	0	0
Sales	0	0
Issuances	0	0
Settlements	0	0
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Balance of recurring Level 3 assets at December 31	$ 1,060	$ 1,060

XML

Loans - Additional Information (Detail) (USD $)	6 Months Ended	9 Months Ended		3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended
	Dec. 31, 2011	Sep. 30, 2012	Dec. 30, 2011	Sep. 30, 2012 Troubled Debt Restructuring [Member]	Sep. 30, 2012 Troubled Debt Restructuring [Member]	Sep. 30, 2012 Troubled Debt Restructuring That Subsequently Defaults [Member]	Sep. 30, 2012 Troubled Debt Restructuring That Subsequently Defaults [Member]	Sep. 30, 2012 Loan Modification Reduction of Stated Interest Rate [Member]	Sep. 30, 2012 Loan Modification Extension of Maturity Date [Member] Minimum [Member]	Sep. 30, 2012 Loan Modification Extension of Maturity Date [Member] Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Specific reserves to customers whose loan terms have been modified in troubled debt restructurings		$ 2,837,000	$ 2,074,000
Post-Modification Outstanding Recorded Investment	17,129,911	153,891	15,229,000
Loan term modifications in troubled debt restructurings, time period								3 years	8 months	12 months
Increased the allowance for loan losses due to troubled debt restructurings	1,699,000	1,189,000			2,871	0
Charge offs due to troubled debt restructurings				0	1,112,147	477,091	1,739,238
Period loan should be contractually past due under modified terms to be considered in payment default					30 days
Loans individually analyzed for credit quality based on credit risk, individual outstanding balance		$ 100,000

XML

General

9 Months Ended

Sep. 30, 2012

General [Abstract]

General

Note 2 - General:

These financial statements were prepared in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all of the disclosures necessary for a complete presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. Except for required accounting changes, these financial statements have been prepared on a basis consistent with the annual financial statements and include, in the opinion of management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results of operations and financial position at the end of and for the periods presented. These financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses and the fair values of financial instruments, in particular, are subject to change.

XML

Quantitative Information about Recurring Level Three Fair Value Measurements (Detail) (USD $) In Thousands, unless otherwise specified					1 Months Ended	9 Months Ended		9 Months Ended								9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2012 Corporate Securities [Member]	Dec. 31, 2011 Corporate Securities [Member]	Sep. 30, 2012 Minimum [Member]	Sep. 30, 2012 Maximum [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Cost Sales Income Approach Valuation Technique [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Cost Sales Income Approach Valuation Technique [Member] Commercial [Member] Impaired Loans [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Cost Sales Income Approach Valuation Technique [Member] Nonresidential Real Estate [Member] Commercial Mortgage Loans, Owner Occupied [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Cost Sales Income Approach Valuation Technique [Member] Nonresidential Real Estate [Member] Commercial Mortgage Loans, Non Owner Occupied [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Cost Sales Income Approach Valuation Technique [Member] Residential Real Estate [Member] Multi Family [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Cost Sales Income Approach Valuation Technique [Member] Residential Real Estate [Member] Residential Real Estate Other Financing Receivable [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Cost Sales Income Approach Valuation Technique [Member] Construction [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Corporate Securities [Member]	Dec. 31, 2011 Significant Unobservable Inputs (Level 3) [Member] Corporate Securities [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Corporate Securities [Member] Discounted Cash Flows Valuation Technique [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Minimum [Member] Cost Sales Income Approach Valuation Technique [Member] Commercial [Member] Impaired Loans [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Minimum [Member] Cost Sales Income Approach Valuation Technique [Member] Nonresidential Real Estate [Member] Commercial Mortgage Loans, Owner Occupied [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Minimum [Member] Cost Sales Income Approach Valuation Technique [Member] Nonresidential Real Estate [Member] Commercial Mortgage Loans, Non Owner Occupied [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Minimum [Member] Cost Sales Income Approach Valuation Technique [Member] Residential Real Estate [Member] Multi Family [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Minimum [Member] Cost Sales Income Approach Valuation Technique [Member] Residential Real Estate [Member] Residential Real Estate Other Financing Receivable [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Minimum [Member] Cost Sales Income Approach Valuation Technique [Member] Construction [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Maximum [Member] Cost Sales Income Approach Valuation Technique [Member] Commercial [Member] Impaired Loans [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Maximum [Member] Cost Sales Income Approach Valuation Technique [Member] Nonresidential Real Estate [Member] Commercial Mortgage Loans, Owner Occupied [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Maximum [Member] Cost Sales Income Approach Valuation Technique [Member] Nonresidential Real Estate [Member] Commercial Mortgage Loans, Non Owner Occupied [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Maximum [Member] Cost Sales Income Approach Valuation Technique [Member] Residential Real Estate [Member] Multi Family [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Maximum [Member] Cost Sales Income Approach Valuation Technique [Member] Residential Real Estate [Member] Residential Real Estate Other Financing Receivable [Member]	Sep. 30, 2012 Significant Unobservable Inputs (Level 3) [Member] Maximum [Member] Cost Sales Income Approach Valuation Technique [Member] Construction [Member]	Sep. 30, 2012 Fair Value, Measurements, Recurring [Member] Significant Unobservable Inputs (Level 3) [Member] Corporate Securities [Member] Discounted Cash Flows Valuation Technique [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Investment securities available-for-sale	$ 302,544	$ 322,512	$ 1,060	$ 1,060										$ 1,060	$ 1,060														$ 1,060
Probability of default																0.00%
Impaired loans	$ 1,149,104	$ 1,112,788					$ 17,111	$ 875	$ 8,255	$ 9,645	$ 577	$ 2,417	$ 4,470
Unobservable Input, discounts ranging					5.00%	10.00%											5.00%	5.00%	5.00%	5.00%	5.00%	5.00%	10.00%	10.00%	10.00%	10.00%	10.00%	10.00%
Valuation Techniques								Cost, sales, income approach	Cost, sales, income approach	Cost, sales, income approach	Cost, sales, income approach	Cost, sales, income approach	Cost, sales, income approach

XML

Amortized Cost Unrecognized Gains and Losses and Fair Value of Securities Held to Maturity (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 58,314	$ 48,975
US States and Political Subdivisions Debt Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	58,314	48,975
Gross Unrecognized Gains	2,169	1,693
Gross Unrecognized Losses	(108)	(25)
Fair Value	$ 60,375	$ 50,643

XML

Fair Value of Available for Sale Securities and Related Gains and Losses Recognized in Accumulated Other Comprehensive Income or Loss (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 294,962	$ 317,493
Gross Unrealized Gains	7,605	5,095
Gross Unrealized Losses	(23)	(76)
Fair Value	302,544	322,512
US Treasury and Government [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	112,473	168,104
Gross Unrealized Gains	1,313	1,368
Gross Unrealized Losses	(23)	(12)
Fair Value	113,763	169,460
Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	181,429	148,329
Gross Unrealized Gains	6,292	3,727
Gross Unrealized Losses	0	(64)
Fair Value	187,721	151,992
Corporate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,060	1,060
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	$ 1,060	$ 1,060

XML

Assets and Liabilities Measured at Fair Value on Non-Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Assets
Impaired loans	$ 1,149,104	$ 1,112,788
Fair Value, Measurements, Nonrecurring [Member]
Assets
Impaired loans	18,493	21,680
Fair Value, Measurements, Nonrecurring [Member] | Construction [Member]
Assets
Impaired loans	4,051	3,787
Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member] | Commercial [Member]
Assets
Impaired loans	771	383
Fair Value, Measurements, Nonrecurring [Member] | Impaired Loans [Member] | Nonresidential Real Estate [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Commercial Mortgage Loans, Owner Occupied [Member] | Nonresidential Real Estate [Member]
Assets
Impaired loans	5,892	8,320
Fair Value, Measurements, Nonrecurring [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member] | Nonresidential Real Estate [Member]
Assets
Impaired loans	3,732	5,858
Fair Value, Measurements, Nonrecurring [Member] | Home Equity Line of Credit [Member] | Residential Real Estate [Member]
Assets
Impaired loans	147	0
Fair Value, Measurements, Nonrecurring [Member] | Multi Family [Member] | Residential Real Estate [Member]
Assets
Impaired loans	1,081	0
Fair Value, Measurements, Nonrecurring [Member] | Residential Real Estate Other Financing Receivable [Member] | Residential Real Estate [Member]
Assets
Impaired loans	2,819	3,332
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Construction [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Impaired Loans [Member] | Commercial [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial Mortgage Loans, Owner Occupied [Member] | Nonresidential Real Estate [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member] | Nonresidential Real Estate [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Home Equity Line of Credit [Member] | Residential Real Estate [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Multi Family [Member] | Residential Real Estate [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Residential Real Estate Other Financing Receivable [Member] | Residential Real Estate [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets
Impaired loans	0	2,421
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Construction [Member]
Assets
Impaired loans	0	214
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Impaired Loans [Member] | Commercial [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Commercial Mortgage Loans, Owner Occupied [Member] | Nonresidential Real Estate [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member] | Nonresidential Real Estate [Member]
Assets
Impaired loans	0	375
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Home Equity Line of Credit [Member] | Residential Real Estate [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Multi Family [Member] | Residential Real Estate [Member]
Assets
Impaired loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Residential Real Estate Other Financing Receivable [Member] | Residential Real Estate [Member]
Assets
Impaired loans	0	1,832
Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets
Impaired loans	18,493	19,259
Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Construction [Member]
Assets
Impaired loans	4,051	3,573
Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Impaired Loans [Member] | Commercial [Member]
Assets
Impaired loans	771	383
Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Commercial Mortgage Loans, Owner Occupied [Member] | Nonresidential Real Estate [Member]
Assets
Impaired loans	5,892	8,320
Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member] | Nonresidential Real Estate [Member]
Assets
Impaired loans	3,732	5,483
Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Home Equity Line of Credit [Member] | Residential Real Estate [Member]
Assets
Impaired loans	147	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Multi Family [Member] | Residential Real Estate [Member]
Assets
Impaired loans	1,081	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Residential Real Estate Other Financing Receivable [Member] | Residential Real Estate [Member]
Assets
Impaired loans	$ 2,819	$ 1,500

XML

Amortized Cost and Fair Value of Debt Securities by Contractual Maturity (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012
Available-for-sale, amortized cost
Due in one year or less	$ 610
Due after one year through five years	51,409
Due after five years through ten years	60,454
Due after ten years	1,060
U.S. Government agency mortgage-backed	181,429
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Total	294,962
Available-for-sale, fair value
Due in one year or less	616
Due after one year through five years	52,076
Due after five years through ten years	61,071
Due after ten years	1,060
U.S. Government agency mortgage-backed	187,721
Available-for-sale Securities, Debt Securities, Total	302,544
Held-to-maturity, amortized cost
Due in one year or less	3,353
Due after one year through five years	29,592
Due after five years through ten years	19,444
Due after ten years	5,925
U.S. Government agency mortgage-backed	0
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount, Total	58,314
Held-to-maturity, fair value
Due in one year or less	3,368
Due after one year through five years	30,780
Due after five years through ten years	20,302
Due after ten years	5,925
U.S. Government agency mortgage-backed	0
Held-to-maturity Securities, Debt Maturities, Fair Value, Total	$ 60,375

XML

Securities - Additional Information (Detail) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Investment [Line Items]
Proceeds from sale of available-for-sale securities	$ 6,944,000	$ 13,367,000
Gains from sale of available-for-sale securities	203,000	231,000
Number of securities in portfolio	227
Number of securities in unrealized loss position	11
Securities in unrealized loss position	131,000		101,000
Mortgage-backed securities issued by U.S. government sponsored entities	100.00%
Carrying value of securities pledged to secure public deposits and repurchase agreements	$ 327,242,000		$ 342,288,000

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Basis of Presentation

Note 1 - Basis of Presentation:

The condensed consolidated financial statements include the accounts of The Bank of Kentucky Financial Corporation (“BKFC” or the “Company”) and its wholly owned subsidiary, The Bank of Kentucky, Inc. (the “Bank”). All significant intercompany accounts and transactions have been eliminated.

XML

Securities with Unrealized Losses Aggregated by Investment Category and Length of Time Individual Securities have been in Continuous Unrealized Loss Position (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Investments, Unrealized Loss Position [Line Items]
Less than 12 Months Fair Value	$ 10,510	$ 58,666
Less than 12 Months Unrealized Loss	(131)	(100)
12 Months or More Fair Value	0	388
12 Months or More Unrealized Loss	0	(1)
Total Fair Value	10,510	59,054
Total Unrealized Loss	(131)	(101)
US Treasury and Government [Member]
Investments, Unrealized Loss Position [Line Items]
Less than 12 Months Fair Value	4,992	18,734
Less than 12 Months Unrealized Loss	(23)	(12)
12 Months or More Fair Value	0	0
12 Months or More Unrealized Loss	0	0
Total Fair Value	4,992	18,734
Total Unrealized Loss	(23)	(12)
Residential Mortgage Backed Securities [Member]
Investments, Unrealized Loss Position [Line Items]
Less than 12 Months Fair Value		36,707
Less than 12 Months Unrealized Loss		(64)
12 Months or More Fair Value		0
12 Months or More Unrealized Loss		0
Total Fair Value		36,707
Total Unrealized Loss		(64)
US States and Political Subdivisions Debt Securities [Member]
Investments, Unrealized Loss Position [Line Items]
Less than 12 Months Fair Value		3,225
Less than 12 Months Unrealized Loss		(24)
12 Months or More Fair Value		388
12 Months or More Unrealized Loss		(1)
Total Fair Value		3,613
Total Unrealized Loss		(25)
Municipal and Other Obligations [Member]
Investments, Unrealized Loss Position [Line Items]
Less than 12 Months Fair Value	5,518	3,225
Less than 12 Months Unrealized Loss	(108)	(24)
12 Months or More Fair Value	0	388
12 Months or More Unrealized Loss	0	(1)
Total Fair Value	5,518	3,613
Total Unrealized Loss	$ (108)	$ (25)

XML

Risk Category of Loans by Class of Loans (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Gross loans	$ 1,160,531		$ 1,131,401
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	181,170		193,176
Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	281,745		266,268
Residential Real Estate [Member] | Home Equity Line of Credit [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	100,292		94,680
Residential Real Estate [Member] | Multi Family [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	46,783		36,756
Residential Real Estate [Member] | Residential Real Estate Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	134,670		134,832
Nonresidential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	555,234		523,485
Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	278,199		252,768
Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	277,035		270,717
Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	98,609		104,788
Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	16,170		16,618
Consumer [Member] | Consumer Credit Card Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	6,497		6,492
Consumer [Member] | Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	9,673		10,126
Municipal Obligations [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	27,603		27,066
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	883,504		831,152
Pass [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	166,935		170,394
Pass [Member] | Residential Real Estate [Member] | Home Equity Line of Credit [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	11,827		0
Pass [Member] | Residential Real Estate [Member] | Multi Family [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	45,311		36,115
Pass [Member] | Residential Real Estate [Member] | Residential Real Estate Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	40,607		38,725
Pass [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	248,156		221,941
Pass [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	255,141		246,614
Pass [Member] | Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	87,924		90,297
Pass [Member] | Consumer [Member] | Consumer Credit Card Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Pass [Member] | Consumer [Member] | Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Pass [Member] | Municipal Obligations [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	27,603		27,066
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	32,949		31,910
Special Mention [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	10,448		9,684
Special Mention [Member] | Residential Real Estate [Member] | Home Equity Line of Credit [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	781		712
Special Mention [Member] | Residential Real Estate [Member] | Multi Family [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	100		103
Special Mention [Member] | Residential Real Estate [Member] | Residential Real Estate Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,143		1,357
Special Mention [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	10,909		7,754
Special Mention [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	7,304		8,902
Special Mention [Member] | Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	2,264		3,398
Special Mention [Member] | Consumer [Member] | Consumer Credit Card Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Special Mention [Member] | Consumer [Member] | Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Special Mention [Member] | Municipal Obligations [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	59,772		74,844
Substandard [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	3,787		13,098
Substandard [Member] | Residential Real Estate [Member] | Home Equity Line of Credit [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,953		976
Substandard [Member] | Residential Real Estate [Member] | Multi Family [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,372		538
Substandard [Member] | Residential Real Estate [Member] | Residential Real Estate Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	10,496		10,843
Substandard [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	19,134		23,073
Substandard [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	14,590		15,201
Substandard [Member] | Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	8,421		11,093
Substandard [Member] | Consumer [Member] | Consumer Credit Card Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Substandard [Member] | Consumer [Member] | Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	19		22
Substandard [Member] | Municipal Obligations [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		84
Doubtful [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Doubtful [Member] | Residential Real Estate [Member] | Home Equity Line of Credit [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		84
Doubtful [Member] | Residential Real Estate [Member] | Multi Family [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Doubtful [Member] | Residential Real Estate [Member] | Residential Real Estate Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Doubtful [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Doubtful [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Doubtful [Member] | Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Doubtful [Member] | Consumer [Member] | Consumer Credit Card Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Doubtful [Member] | Consumer [Member] | Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Doubtful [Member] | Municipal Obligations [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0		0
Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	184,306	[1]	193,411	[1]
Not Rated [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0	[1]	0	[1]
Not Rated [Member] | Residential Real Estate [Member] | Home Equity Line of Credit [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	85,731	[1]	92,908	[1]
Not Rated [Member] | Residential Real Estate [Member] | Multi Family [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0	[1]	0	[1]
Not Rated [Member] | Residential Real Estate [Member] | Residential Real Estate Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	82,424	[1]	83,907	[1]
Not Rated [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0	[1]	0	[1]
Not Rated [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0	[1]	0	[1]
Not Rated [Member] | Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	0	[1]	0	[1]
Not Rated [Member] | Consumer [Member] | Consumer Credit Card Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	6,497	[1]	6,492	[1]
Not Rated [Member] | Consumer [Member] | Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	9,654	[1]	10,104	[1]
Not Rated [Member] | Municipal Obligations [Member]
Financing Receivable, Recorded Investment [Line Items]
Gross loans	$ 0	[1]	$ 0	[1]

[1] Not rated loans represent the homogenous pools risk category.

XML

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 81,950	$ 135,964
Interest-bearing deposits with banks	250	250
Available-for-sale securities	302,544	322,512
Held-to-maturity securities	58,314	48,975
Loans held for sale	19,314	8,920
Total loans	1,159,074	1,129,954
Less: Allowance for loan losses	16,585	18,288
Net loans	1,142,489	1,111,666
Premises and equipment, net	22,714	22,827
FHLB stock, at cost	5,099	5,099
Goodwill	22,023	22,023
Acquisition intangibles, net	2,645	3,228
Cash surrender value of life insurance	33,509	32,850
Accrued interest receivable and other assets	31,103	30,410
Total assets	1,721,954	1,744,724
Liabilities
Deposits	1,471,246	1,498,821
Short-term borrowings	22,142	29,300
Notes payable	48,721	48,739
Accrued interest payable and other liabilities	12,224	11,294
Total liabilities	1,554,333	1,588,154
Shareholders' Equity
Common stock, no par value, 15,000,000 shares authorized, 7,467,396 (2012) and 7,432,995 (2011) shares issued	3,098	3,098
Additional paid-in capital	34,971	34,121
Retained earnings	124,548	116,038
Accumulated other comprehensive income	5,004	3,313
Total shareholders' equity	167,621	156,570
Total liabilities and shareholders' equity	$ 1,721,954	$ 1,744,724

XML

Fair Value - Additional Information (Detail) (USD $)	6 Months Ended	9 Months Ended
	Dec. 31, 2011	Sep. 30, 2012	Sep. 30, 2011
Fair Value Measurements [Line Items]
Impaired loans gross carrying amount	$ 29,124,000	$ 24,746,000
Impaired loans, valuation allowance	7,443,000	6,254,000	7,762,000
Increase in provision for loan losses	$ 1,699,000	$ 1,189,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Exercise of stock options, shares	34,401	700

XML

Individually Impaired Loans by Class of Loans (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	$ 37,680	$ 43,630	$ 37,680	$ 43,630	$ 38,326
Recorded Investment	34,503	39,173	34,503	39,173	35,261
Allowance for Loan Losses Allocated	6,254	7,762	6,254	7,762	7,443
Average Recorded Investment	35,515	34,682	36,647	29,851
Interest Income Recognized	218	288	662	612
Interest Received	211	221	601	513
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	1,118		1,118		917
Allowance for Loan Losses Allocated	317		317		224
Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	8,500		8,500		6,100
Allowance for Loan Losses Allocated	1,729		1,729		477
Nonresidential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	19,111		19,111		20,390
Allowance for Loan Losses Allocated	2,993		2,993		2,994
Construction [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	5,774		5,774		7,854
Allowance for Loan Losses Allocated	1,215		1,215		3,748
Impaired Financing Receivables with No Related Allowance [Member] | Commercial [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	30	349	30	349	350
Recorded Investment	30	310	30	310	310
Allowance for Loan Losses Allocated	0	0	0	0	0
Average Recorded Investment	170	371	263	351
Interest Income Recognized	0	0	0	0
Interest Received	0	0	0	0
Impaired Financing Receivables with No Related Allowance [Member] | Residential Real Estate [Member] | Home Equity Line of Credit [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	50	0	50	0	50
Recorded Investment	50	0	50	0	50
Allowance for Loan Losses Allocated	0	0	0	0	0
Average Recorded Investment	50		50	0
Interest Income Recognized	0		0	0
Interest Received	0		0	0
Impaired Financing Receivables with No Related Allowance [Member] | Residential Real Estate [Member] | Multi Family [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	379	0	379	0	538
Recorded Investment	48	0	48	0	538
Allowance for Loan Losses Allocated	0	0	0	0	0
Average Recorded Investment	24	0	273	17
Interest Income Recognized	0	0	0	0
Interest Received	0	0	0	0
Impaired Financing Receivables with No Related Allowance [Member] | Residential Real Estate [Member] | Residential Real Estate Other Financing Receivable [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	2,869	2,121	2,869	2,121	1,703
Recorded Investment	2,626	2,121	2,626	2,121	1,703
Allowance for Loan Losses Allocated	0	0	0	0	0
Average Recorded Investment	2,336	2,325	2,094	1,288
Interest Income Recognized	0	0	0	0
Interest Received	0	0	0	0
Impaired Financing Receivables with No Related Allowance [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	802	1,011	802	1,011	1,101
Recorded Investment	792	955	792	955	1,101
Allowance for Loan Losses Allocated	0	0	0	0	0
Average Recorded Investment	490	587	698	503
Interest Income Recognized	0	0	0	0
Interest Received	0	0	0	0
Impaired Financing Receivables with No Related Allowance [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	6,206	897	6,206	897	2,122
Recorded Investment	5,701	897	5,701	897	2,116
Allowance for Loan Losses Allocated	0	0	0	0	0
Average Recorded Investment	3,797	1,044	2,848	848
Interest Income Recognized	0	0	0	0
Interest Received	0	0	0	0
Impaired Financing Receivables with No Related Allowance [Member] | Construction [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	809	2,036	809	2,036	356
Recorded Investment	509	889	509	889	319
Allowance for Loan Losses Allocated	0	0	0	0	0
Average Recorded Investment	432	909	256	559
Interest Income Recognized	0	0	0	0
Interest Received	0	0	0	0
Impaired Financing Receivables with Related Allowance [Member] | Commercial [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	1,088	1,379	1,088	1,379	733
Recorded Investment	1,088	1,379	1,088	1,379	607
Allowance for Loan Losses Allocated	317	504	317	504	224
Average Recorded Investment	823	2,370	950	1,959
Interest Income Recognized	4	10	7	17
Interest Received	4	5	5	9
Impaired Financing Receivables with Related Allowance [Member] | Residential Real Estate [Member] | Home Equity Line of Credit [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	1,488	0	1,488	0	0
Recorded Investment	1,488	0	1,488	0	0
Allowance for Loan Losses Allocated	1,341	0	1,341	0	0
Average Recorded Investment	813	0	339	0
Interest Income Recognized	12	0	12	0
Interest Received	12	0	12	0
Impaired Financing Receivables with Related Allowance [Member] | Residential Real Estate [Member] | Multi Family [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	1,324	868	1,324	868	0
Recorded Investment	1,324	868	1,324	868	0
Allowance for Loan Losses Allocated	243	291	243	291	0
Average Recorded Investment	1,554	869	815	922
Interest Income Recognized	11	14	22	42
Interest Received	11	9	22	28
Impaired Financing Receivables with Related Allowance [Member] | Residential Real Estate [Member] | Residential Real Estate Other Financing Receivable [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	3,109	2,869	3,109	2,869	3,859
Recorded Investment	2,964	2,850	2,964	2,850	3,809
Allowance for Loan Losses Allocated	145	433	145	433	477
Average Recorded Investment	3,309	2,755	3,557	2,441
Interest Income Recognized	31	18	76	54
Interest Received	24	17	64	51
Impaired Financing Receivables with Related Allowance [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	8,544	9,471	8,544	9,471	10,771
Recorded Investment	8,543	9,348	8,543	9,348	9,798
Allowance for Loan Losses Allocated	2,651	1,093	2,651	1,093	1,477
Average Recorded Investment	8,774	5,123	9,081	2,884
Interest Income Recognized	81	80	239	81
Interest Received	81	25	237	26
Impaired Financing Receivables with Related Allowance [Member] | Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	4,595	13,667	4,595	13,667	8,476
Recorded Investment	4,074	11,830	4,074	11,830	7,375
Allowance for Loan Losses Allocated	342	2,185	342	2,185	1,517
Average Recorded Investment	6,449	9,870	7,406	10,044
Interest Income Recognized	34	90	143	215
Interest Received	34	90	106	210
Impaired Financing Receivables with Related Allowance [Member] | Construction [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	6,387	8,962	6,387	8,962	8,267
Recorded Investment	5,266	7,726	5,266	7,726	7,535
Allowance for Loan Losses Allocated	1,215	3,256	1,215	3,256	3,748
Average Recorded Investment	6,494	8,459	8,017	8,035
Interest Income Recognized	45	76	163	203
Interest Received	$ 45	$ 75	$ 155	$ 189

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2012

Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

			Fair Value Measurements at
			September 30, 2012 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	September 30,		Identical Assets		Inputs		Inputs
	2012		(Level 1)		(Level 2)		(Level 3)
Assets
Investment securities available-for-sale
U.S. government sponsored entities and agencies	$	113,763	$	-	$	113,763	$	-
U.S. government agency mortgage backed		187,721		-		187,721		-
Corporate		1,060		-		-		1,060
Derivatives		1,841		-		1,841		-
Total	$	304,385	$	-	$	303,325	$	1,060
Liabilities
Derivatives	$	1,841	$	-	$	1,841	$	-
Total	$	1,841	$	-	$	1,841	$	-

			Fair Value Measurements at
			December 31, 2011 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
	2011		(Level 1)		(Level 2)		(Level 3)
Assets
Investment securities available-for-sale
U.S. government sponsored entities and agencies	$	169,460		-		169,460		-
U.S. government agency mortgage backed		151,992		-		151,992		-
Corporate		1,060		-		-		1,060
Derivatives		1,349		-		1,349		-
Total	$	323,861		-		322,801		1,060
Liabilities
Derivatives	$	1,349		-		1,349		-
Total	$	1,349		-		1,349		-

Reconciliation of Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs Level Three

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period ended September 30 (in thousands):

	Corporate Securities
	9/30/12		12/31/11
Balance of recurring Level 3 assets at January 1	$	1,060	$	1,060
Total gains or losses for the period:
Included in earnings
Included in other comprehensive income
Purchases		-		-
Sales		-		-
Issuances		-		-
Settlements		-		-
Transfers into Level 3		-		-
Transfers out of Level 3		-		-
Balance of recurring Level 3 assets at December 31	$	1,060	$	1,060

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

The following table presents quantitative information about recurring Level 3 fair value measurements at September 30, 2012 (in thousands):

			Valuation
	Fair value		Technique(s)	Unobservable Input(s)	Value
Corporate security	$	1,060	Discounted cash flow	Probability of default		0	%

Assets and Liabilities Measured at Fair Value on Nonrecurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at
			September 30, 2012 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	September 30		Identical Assets		Inputs		Inputs
	2012		(Level 1)		(Level 2)		(Level 3)
Assets
Impaired loans
Commercial	$	771	$	-	$	-	$	771
Nonresidential real estate		-
Owner occupied properties		5,892		-		-		5,892
Non owner occupied properties		3,732		-		-		3,732
Residential real estate
Home equity lines of credit		147		-		-		147
Multifamily properties		1,081		-		-		1,081
Other		2,819		-		-		2,819
Construction		4,051		-		-		4,051
Total	$	18,493	$	-	$	-	$	18,493

			Fair Value Measurements at
			December 31, 2011 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	December 31		Identical Assets		Inputs		Inputs
	2011		(Level 1)		(Level 2)		(Level 3)
Assets
Impaired loans
Commercial	$	383	$	-	$	-	$	383
Nonresidential real estate		-
Owner occupied properties		8,320		-		-		8,320
Non owner occupied properties		5,858		-		375		5,483
Residential real estate
Home equity lines of credit		-		-		-		-
Multifamily properties		-		-		-		-
Other		3,332		-		1,832		1,500
Construction		3,787		-		214		3,573
Total	$	21,680	$	-	$	2,421	$	19,259

Carrying Amounts and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments at September 30, 2012 and December 31, 2011 are as follows (in thousands):

				Fair Value Measurements at
				September 30, 2012 Using:
	Carrying Value			Level 1			Level 2			Level 3			Total
(Dollars in thousands)
Financial assets
Cash and cash equivalents	$	81,950		$	81,950		$			$			$	81,950
Interest-bearing deposits with Banks		250						250						250
Securities available-for-sale		302,544						301,484			1,060			302,544
Securities held-to-maturity		58,314						60,375						60,375
Federal Home Loan Bank stock		5,099			N/A									N/A
Loans held for sale		19,314						19,314						19,314
Loans, net		1,142,489									1,149,104			1,149,104
Accrued interest receivable		4,428						4,428						4,428
Derivative assets		1,841						1,841						1,841
Financial liabilities
Deposits	$	(1,471,246	)	$	(1,101,443	)	$	(366,976	)	$			$	(1,468,419	)
Short-term borrowings		(22,142	)					(22,142	)					(22,142	)
Notes payable		(48,721						(22,414	)		(22,366	)		(44,780	)
Accrued interest payable		(1,082	)					(1,082	)					(1,082	)
Standby letters of credit		(208	)					(208	)					(208	)
Derivative liabilities		(1,841	)					(1,841	)					(1,841	)

				Fair Value Measurements at
				December 31, 2011 Using:
	Carrying Value			Level 1			Level 2			Level 3			Total
(Dollars in thousands)
Financial assets
Cash and cash equivalents	$	135,964		$	135,964		$			$			$	135,964
Interest-bearing deposits with Banks		250						250						250
Securities available-for-sale		322,512						321,452			1,060			322,512
Securities held-to-maturity		48,975						50,643						50,643
Federal Home Loan Bank stock		5,099			N/A									N/A
Loans held for sale		8,920						8,920						8,920
Loans, net		1,111,666						1,093,529			19,259			1,112,788
Accrued interest receivable		4,887						4,887						4,887
Derivative assets		1,349						1,349						1,349
Financial liabilities
Deposits	$	(1,498,821	)	$	(1,092,434	)	$	(408,859	)	$			$	(1,501,293	)
Short-term borrowings		(29,300	)					(29,300	)					(29,300	)
Notes payable		(48,739	)					(27,477	)		(18,476	)		(45,953	)
Accrued interest payable		(1,582	)					(1,582	)					(1,582	)
Standby letters of credit		(263	)					(263	)					(263	)
Derivative liabilities		(1,349	)					(1,349	)					(1,349	)

Impaired Loans [Member]

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

The following table presents quantitative information about recurring Level 3 fair value measurements at September 30, 2012 (in thousands):

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Value
Assets
Impaired Loans:
Commercial		344	Cost, sales, income approach	Adjustments for comparable properties, market conditions		5-10%
Nonresidential real estate
Owner occupied properties		7,279	Cost, sales, income approach	Adjustments for comparable properties, market conditions		5-10%
Non owner occupied properties		6,763	Cost, sales, income approach	adjustments for comparable properties, market conditions		5-10%
Residential real estate
Home equity lines of credit
Multifamily properties		1,543	Cost, sales, income approach	Adjustments for comparable properties, market conditions		5-10%
Other		490	Cost, sales, income approach	Adjustments for comparable properties, market conditions		5-10%
Construction		692	Cost, sales, income approach	Adjustments for comparable properties, market conditions		5-10%
Total		17,111

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Aging of Recorded Investment in Past Due Loans by Class of Loans (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans 30-90 days past due	$ 11,448	$ 14,567
Loans over 90 days past due	105	219
Nonaccrual	14,813	15,651
Loans not past due	1,134,165	1,100,964
Total	1,160,531	1,131,401
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans 30-90 days past due	599	692
Loans over 90 days past due	0	74
Nonaccrual	968	1,175
Loans not past due	179,603	191,235
Total	181,170	193,176
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total	281,745	266,268
Residential Real Estate [Member] | Home Equity Line of Credit [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans 30-90 days past due	827	1,094
Loans over 90 days past due	39	0
Nonaccrual	768	910
Loans not past due	98,658	92,676
Total	100,292	94,680
Residential Real Estate [Member] | Multi Family [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans 30-90 days past due	111	0
Loans over 90 days past due	0	0
Nonaccrual	48	0
Loans not past due	46,624	36,756
Total	46,783	36,756
Residential Real Estate [Member] | Residential Real Estate Other Financing Receivable [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans 30-90 days past due	3,657	5,854
Loans over 90 days past due	0	112
Nonaccrual	3,676	4,415
Loans not past due	127,337	124,451
Total	134,670	134,832
Nonresidential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total	555,234	523,485
Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans 30-90 days past due	3,591	2,623
Loans over 90 days past due	0	0
Nonaccrual	1,368	2,270
Loans not past due	273,240	247,875
Total	278,199	252,768
Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans 30-90 days past due	1,881	3,942
Loans over 90 days past due	0	0
Nonaccrual	6,305	4,358
Loans not past due	268,849	262,417
Total	277,035	270,717
Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans 30-90 days past due	737	265
Loans over 90 days past due	0	0
Nonaccrual	1,601	1,897
Loans not past due	96,271	102,626
Total	98,609	104,788
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total	16,170	16,618
Consumer [Member] | Consumer Credit Card Financing Receivable [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans 30-90 days past due	32	60
Loans over 90 days past due	66	32
Nonaccrual	0	0
Loans not past due	6,399	6,400
Total	6,497	6,492
Consumer [Member] | Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans 30-90 days past due	13	37
Loans over 90 days past due	0	1
Nonaccrual	79	626
Loans not past due	9,581	9,462
Total	9,673	10,126
Municipal Obligations [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans 30-90 days past due	0
Loans over 90 days past due	0	0
Nonaccrual	0	0
Loans not past due	27,603	27,066
Total	$ 27,603	$ 27,066

XML

Numbers of Shares Used to Compute Basic and Diluted Earnings Per Share (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Weighted average shares outstanding	7,465,926	7,432,995	7,459,988	7,432,762
Dilutive effects of assumed exercises of stock options and warrants	88,133	55,748	77,415	41,332
Shares used to compute diluted earnings per share	7,554,059	7,488,743	7,537,403	7,474,094

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash Flows from Operating Activities
Net income	$ 13,135	$ 11,580
Adjustments to reconcile net income to net cash From operating activities	(1,246)	19,113
Net cash from operating activities	11,889	30,693
Cash Flows from Investing Activities
Net change in interest-bearing balances	0	(150)
Proceeds from paydowns and maturities of held-to-maturity securities	2,780	4,399
Proceeds from paydowns and maturities of available-for-sale securities	151,460	172,311
Purchases of held-to-maturity securities	(12,172)	(10,048)
Purchases of available-for-sale securities	(138,121)	(231,932)
Purchases of company owned life insurance	0	(6,500)
Net change in loans	(39,438)	(24,377)
Proceeds from the sale of other real estate	2,488	3,021
Proceeds from the sale of securities	6,944	13,367
Property and equipment expenditures	(1,210)	(722)
Net cash from investing activities	(27,269)	(80,631)
Cash Flows from Financing Activities
Net change in deposits	(27,575)	(53,097)
Net change in short-term borrowings	(7,158)	2,829
Proceeds from exercise of stock options	741	14
Cash dividends paid	(4,624)	(4,799)
Payments on note payable	(18)	(16)
Net cash from financing activities	(38,634)	(55,069)
Net change in cash and cash equivalents	(54,014)	(105,007)
Cash and cash equivalents at beginning of period	135,964	172,664
Cash and cash equivalents at end of period	$ 81,950	$ 67,657

XML

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Common stock, no par value
Common stock, shares authorized	15,000,000	15,000,000
Common stock, shares issued	7,467,396	7,432,995

XML

Fair Value

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value

Note 10 –Fair Value:

Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Investment Securities: The fair values of securities available-for-sale are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). One corporate security is valued using Level 3 inputs as there is no readily observable market activity. Management determines the value of this security based on expected cash flows, the credit quality of the security and current market interest rates.

Derivatives: The Bank’s derivative instruments consist of over-the-counter interest-rate swaps that trade in liquid markets. The fair value of the derivative instruments is primarily measured by obtaining pricing from broker-dealers recognized to be market participants. The pricing is derived from market observable inputs that can generally be verified and do not typically involve significant judgment by the Bank. This valuation method is classified as Level 2 in the fair value hierarchy.

Impaired Loans: At the time a loan is considered impaired, it is recorded at the lower of cost or fair value. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Loans Held For Sale: Loans held for sale are carried at the lower of cost or fair value, which is evaluated on a pool-level basis. The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2).

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

			Fair Value Measurements at
			September 30, 2012 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	September 30,		Identical Assets		Inputs		Inputs
	2012		(Level 1)		(Level 2)		(Level 3)
Assets
Investment securities available-for-sale
U.S. government sponsored entities and agencies	$	113,763	$	-	$	113,763	$	-
U.S. government agency mortgage backed		187,721		-		187,721		-
Corporate		1,060		-		-		1,060
Derivatives		1,841		-		1,841		-
Total	$	304,385	$	-	$	303,325	$	1,060
Liabilities
Derivatives	$	1,841	$	-	$	1,841	$	-
Total	$	1,841	$	-	$	1,841	$	-

			Fair Value Measurements at
			December 31, 2011 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
	2011		(Level 1)		(Level 2)		(Level 3)
Assets
Investment securities available-for-sale
U.S. government sponsored entities and agencies	$	169,460		-		169,460		-
U.S. government agency mortgage backed		151,992		-		151,992		-
Corporate		1,060		-		-		1,060
Derivatives		1,349		-		1,349		-
Total	$	323,861		-		322,801		1,060
Liabilities
Derivatives	$	1,349		-		1,349		-
Total	$	1,349		-		1,349		-

There were no transfers between Level 1 and Level 2 during 2012 or 2011.

There were no gains or losses for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarter ended September 30, 2012.

There were no changes in unrealized gains and losses recorded in earnings for the quarter ended September 30, 2012 for Level 3 assets and liabilities that are still held at September 30, 2012.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period ended September 30 (in thousands):

	Corporate Securities
	9/30/12		12/31/11
Balance of recurring Level 3 assets at January 1	$	1,060	$	1,060
Total gains or losses for the period:
Included in earnings
Included in other comprehensive income
Purchases		-		-
Sales		-		-
Issuances		-		-
Settlements		-		-
Transfers into Level 3		-		-
Transfers out of Level 3		-		-
Balance of recurring Level 3 assets at December 31	$	1,060	$	1,060

The following table presents quantitative information about recurring Level 3 fair value measurements at September 30, 2012 (in thousands):

			Valuation
	Fair value		Technique(s)	Unobservable Input(s)	Value
Corporate security	$	1,060	Discounted cash flow	Probability of default		0	%

The interest rate on this security is based on interest rates paid for securities with similar credit characteristics, but the probability of default is determined through a credit quality review rather than formal ratings or other observable inputs. The interest rate adjusts to reflect current market conditions of highly rated investments, if probability of default changed significantly, the interest rate would adjust accordingly and the fair value would be updated. Management reviews this interest rate and the security’s credit quality quarterly and a market value adjustment is made if necessary pursuant to this review.

Assets and Liabilities Measured on a Non-Recurring Basis

(Dollars in thousands)

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at
			September 30, 2012 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	September 30		Identical Assets		Inputs		Inputs
	2012		(Level 1)		(Level 2)		(Level 3)
Assets
Impaired loans
Commercial	$	771	$	-	$	-	$	771
Nonresidential real estate		-
Owner occupied properties		5,892		-		-		5,892
Non owner occupied properties		3,732		-		-		3,732
Residential real estate
Home equity lines of credit		147		-		-		147
Multifamily properties		1,081		-		-		1,081
Other		2,819		-		-		2,819
Construction		4,051		-		-		4,051
Total	$	18,493	$	-	$	-	$	18,493

			Fair Value Measurements at
			December 31, 2011 Using:
					Significant
			Quoted Prices in		Other		Significant
	Total		Active Markets for		Observable		Unobservable
	December 31		Identical Assets		Inputs		Inputs
	2011		(Level 1)		(Level 2)		(Level 3)
Assets
Impaired loans
Commercial	$	383	$	-	$	-	$	383
Nonresidential real estate		-
Owner occupied properties		8,320		-		-		8,320
Non owner occupied properties		5,858		-		375		5,483
Residential real estate
Home equity lines of credit		-		-		-		-
Multifamily properties		-		-		-		-
Other		3,332		-		1,832		1,500
Construction		3,787		-		214		3,573
Total	$	21,680	$	-	$	2,421	$	19,259

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a gross carrying amount of $24,747,000 with a valuation allowance of $6,254,000, resulting in a decrease in provision for loan losses of $1,189,000 for the first nine months of 2012. As of December 31, 2011, impaired loans had a gross carrying amount of $29,124,000, with a valuation allowance of $7,443,000, resulting in an increase in provision for loan losses of $1,699,000.

Values for collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure or other factors management deems relevant to arrive at a representative fair value. Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach.  The cost method bases value on the cost to replace the current property.  The market comparison approach evaluates the sales price of similar properties in the same market area.  The income approach considers net operating income generated by the property and an investor’s required return.  The final fair value is based on a reconciliation of these three approaches.

The following table presents quantitative information about recurring Level 3 fair value measurements at September 30, 2012 (in thousands):

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Discount
Assets
Impaired Loans:
Commercial	$	875	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Nonresidential real estate
Owner occupied properties		8,255	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Non owner occupied properties		9,645	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Residential real estate
Home equity lines of credit
Multifamily properties		577	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Other		2,417	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Construction		4,470	Cost, sales, income approach	Adjustment for comparable properties, market conditions	5-10%
Total	$	26,239

The carrying amounts and estimated fair values of financial instruments at September 30, 2012 and December 31, 2011 are as follows (in thousands):

				Fair Value Measurements at
				September 30, 2012 Using:
	Carrying Value			Level 1			Level 2			Level 3			Total
(Dollars in thousands)
Financial assets
Cash and cash equivalents	$	81,950		$	81,950		$			$			$	81,950
Interest-bearing deposits with Banks		250						250						250
Securities available-for-sale		302,544						301,484			1,060			302,544
Securities held-to-maturity		58,314						60,375						60,375
Federal Home Loan Bank stock		5,099			N/A									N/A
Loans held for sale		19,314						19,314						19,314
Loans, net		1,142,489									1,149,104			1,149,104
Accrued interest receivable		4,428						4,428						4,428
Derivative assets		1,841						1,841						1,841
Financial liabilities
Deposits	$	(1,471,246	)	$	(1,101,443	)	$	(366,976	)	$			$	(1,468,419	)
Short-term borrowings		(22,142	)					(22,142	)					(22,142	)
Notes payable		(48,721						(22,414	)		(22,366	)		(44,780	)
Accrued interest payable		(1,082	)					(1,082	)					(1,082	)
Standby letters of credit		(208	)					(208	)					(208	)
Derivative liabilities		(1,841	)					(1,841	)					(1,841	)

				Fair Value Measurements at
				December 31, 2011 Using:
	Carrying Value			Level 1			Level 2			Level 3			Total
(Dollars in thousands)
Financial assets
Cash and cash equivalents	$	135,964		$	135,964		$			$			$	135,964
Interest-bearing deposits with Banks		250						250						250
Securities available-for-sale		322,512						321,452			1,060			322,512
Securities held-to-maturity		48,975						50,643						50,643
Federal Home Loan Bank stock		5,099			N/A									N/A
Loans held for sale		8,920						8,920						8,920
Loans, net		1,111,666						1,093,529			19,259			1,112,788
Accrued interest receivable		4,887						4,887						4,887
Derivative assets		1,349						1,349						1,349
Financial liabilities
Deposits	$	(1,498,821	)	$	(1,092,434	)	$	(408,859	)	$			$	(1,501,293	)
Short-term borrowings		(29,300	)					(29,300	)					(29,300	)
Notes payable		(48,739	)					(27,477	)		(18,476	)		(45,953	)
Accrued interest payable		(1,582	)					(1,582	)					(1,582	)
Standby letters of credit		(263	)					(263	)					(263	)
Derivative liabilities		(1,349	)					(1,349	)					(1,349	)

The estimated fair value approximates carrying amounts for all items except those described below. The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2. Estimated fair value for both securities available-for-sale and held-to-maturity is as previously described for securities available-for-sale. It is not practicable to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability. Fair values of loans, excluding loans held for sale, are estimated as set forth below:

For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification. The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification. The carrying amounts of federal funds purchased, borrowings under repurchase agreements and other short-term borrowings, generally maturing within ninety days, approximate their fair values resulting in a Level 2 classification. The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification. The fair values of the Company’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification. Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material. Estimated fair value of standby letters of credit are based on their current unearned fee balance. Estimated fair value for commitments to make loans and unused lines of credit are considered nominal. Estimated fair value for derivatives is determined as previously described above.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 19, 2012
Document Documentand Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Trading Symbol	BKYF
Entity Registrant Name	BANK OF KENTUCKY FINANCIAL CORP
Entity Central Index Key	0000934547
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock Shares Outstanding		7,470,236

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Earnings per Share (Tables)

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Numbers of Shares Used to Compute Basic and Diluted Earnings Per Share

	Three Months Ended September 30				Nine Months Ended September 30
	2012		2011		2012		2011
Weighted average shares outstanding		7,465,926		7,432,995		7,459,988		7,432,762
Dilutive effects of assumed exercises of stock options, restricted stock units and warrants		88,133		55,748		77,415		41,332
Shares used to compute diluted earnings per share		7,554,059		7,488,743		7,537,403		7,474,094

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
INTEREST INCOME
Loans, including related fees	$ 13,771	$ 14,488	$ 41,363	$ 43,421
Securities and other	1,662	1,792	5,419	5,281
Total interest income	15,433	16,280	46,782	48,702
INTEREST EXPENSE
Deposits	1,214	1,954	4,128	6,493
Borrowings	257	250	801	758
Total interest expense	1,471	2,204	4,929	7,251
Net interest income	13,962	14,076	41,853	41,451
Provision for loan losses	2,200	2,550	5,700	8,550
Net interest income after provision for loan losses	11,762	11,526	36,153	32,901
NON-INTEREST INCOME
Service charges and fees	2,325	2,470	6,767	7,051
Mortgage banking income	917	704	2,092	1,209
Net securities gains(losses)	0	0	203	231
Company owned life insurance earnings	300	306	910	842
Bankcard transaction revenue	940	848	2,794	2,497
Trust fee income	710	630	2,093	2,016
Other	669	339	1,961	1,348
Total non-interest income	5,861	5,297	16,820	15,194
NON-INTEREST EXPENSE
Salaries and benefits	5,909	5,351	17,084	15,150
Occupancy and equipment	1,316	1,216	3,908	3,705
Data processing	505	500	1,573	1,461
Advertising	377	464	1,146	1,186
Other	3,692	3,196	10,957	10,209
Total non-interest expense	11,799	10,727	34,668	31,711
INCOME BEFORE INCOME TAXES	5,824	6,096	18,305	16,384
Less: income taxes	1,628	1,822	5,170	4,804
NET INCOME	4,196	4,274	13,135	11,580
Preferred stock dividend and discount accretion	0	(261)	0	(777)
Net Income available to common shareholders	4,196	4,013	13,135	10,803
Comprehensive Income	$ 5,463	$ 5,136	$ 14,826	$ 14,549
Net income per common share:
Earnings per share, basic	$ 0.56	$ 0.54	$ 1.76	$ 1.45
Earnings per share, diluted	$ 0.56	$ 0.54	$ 1.74	$ 1.45

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Cash and Cash Equivalents

9 Months Ended

Sep. 30, 2012

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

Note 5 – Cash and Cash Equivalents:

Cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and investments in money market mutual funds. The Company reports net cash flows for customer loan and deposit transactions, interest-bearing balances with banks and short-term borrowings with maturities of 90 days or less.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Stock-Based Compensation

Note 4 – Stock-Based Compensation:

Stock-based compensation in the form of options to buy stock and restricted stock units (“RSUs”) are granted to directors, officers and employees under the Company’s incentive stock plan (the “Plan”), which provides for the issuance of up to 1,000,000 shares.

Stock Options

The specific terms of each option agreement are determined by the Compensation Committee at the date of the grant. For current options outstanding, options granted to directors vest immediately and options granted to employees generally vest evenly over a five-year period.

The Company recorded stock option expense of $24,000 (net of taxes) and $76,000 (net of taxes) in the three and nine months ended September 30, 2012, and $51,000 (net of taxes) and $152,000 (net of taxes) in the three and nine months ended September 30, 2011.

Restricted Stock Units

The specific term of each RSU award are determined by the Compensation Committee at the date of the grant. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. The fair value of the stock was determined using the total number of RSU’s granted multiplied by the grant date fair market value of a share of company stock. RSU’s fully vest on the first anniversary of the grant date.

A summary of changes in the Company’s nonvested shares for the year follows:

			Weighted-Average
			Grant-Date
Nonvested Shares	Shares		Fair Value
Nonvested at January 1, 2012		0	$	-
Granted		4,185		25.80
Vested		0		-
Forfeited		0		-
Nonvested at September 30, 2012		4,185	$	25.80

The Company recorded RSU expense of $36,000 for the three and nine months ended September 30, 2012. As of September 30, 2012, there was $84,000 of total unrecognized compensation cost related to nonvested shares granted under the RRP. The cost is expected to be recognized over a period of 7 months.

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Earnings Per Share - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Options not considered in diluted earnings per share computation as they were not dilutive	187,720	416,604	264,389	354,616

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Share Based Compensation Arrangement By Share Based Payment Award Non Option Equity Instruments [Table Text Block]

A summary of changes in the Company’s nonvested shares for the year follows:

			Weighted-Average
			Grant-Date
Nonvested Shares	Shares		Fair Value
Nonvested at January 1, 2012		0	$	-
Granted		4,185		25.80
Vested		0		-
Forfeited		0		-
Nonvested at September 30, 2012		4,185	$	25.80

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Securities

9 Months Ended

Sep. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Securities

Note 8–Securities:

The fair value of available-for-sale securities and the related gains and losses recognized in accumulated other comprehensive income (loss) was as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Available-for-Sale	Cost		Gains		Losses			Value
September 30, 2012
U.S. government, federal agencies and government sponsored enterprises	$	112,473	$	1,313	$	(23	)	$	113,763
U.S. government residential mortgage-backed		181,429		6,292		-			187,721
Corporate		1,060		-		-			1,060
	$	294,962	$	7,605	$	(23	)	$	302,544

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
December 31, 2011
U.S. government, federal agencies and government sponsored enterprises	$	168,104	$	1,368	$	(12	)	$	169,460
U.S. government residential mortgage-backed		148,329		3,727		(64	)		151,992
Corporate		1,060		-		-			1,060
	$	317,493	$	5,095	$	(76	)	$	322,512

The carrying amount, unrecognized gains and losses, and fair value of securities held-to-maturity were as follows (in thousands):

			Gross		Gross
	Amortized		Unrecognized		Unrecognized			Fair
Held-to-Maturity	Cost		Gains		Losses			Value
2012
Municipal and other obligations	$	58,314	$	2,169	$	(108	)	$	60,375
2011
Municipal and other obligations	$	48,975	$	1,693	$	(25	)	$	50,643

The amortized cost and fair value of debt securities and carrying amount, if different, at September 30, 2012 by contractual maturity were as follows (in thousands), with securities not due at a single maturity date, primarily mortgage-backed securities, shown separately.

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	610	$	616	$	3,353	$	3,368
Due after one year through five years		51,409		52,076		29,592		30,780
Due after five years through ten years		60,454		61,071		19,444		20,302
Due after ten years		1,060		1,060		5,925		5,925
U.S. Governmentagency mortgage-backed		181,429		187,721		-		-
	$	294,962	$	302,544	$	58,314	$	60,375

Proceeds on the sale of $6,944,000 of available-for-sale securities resulted in gains of $203,000 for the first nine months of 2012. No securities were sold with losses in the first nine months of 2012. Proceeds on the sale of $13,367,000 of available-for-sale securities resulted in gains of $231,000 for the first nine months of 2011, with no losses.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Investment securities classified as available-for-sale or held-to-maturity are evaluated for OTTI under ASC 320, Accounting for Certain Investments in Debt and Equity Securities.

In determining OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. Otherwise, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors shall be recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings shall become the new amortized cost basis of the investment.

As of September 30, 2012, the Bank’s security portfolio consisted of 227 securities, 11 of which were in an unrealized loss position of $131,000. There was no OTTI of securities at September 30, 2012. Unrealized losses have not been recognized into income because the issuers’ bonds are of high credit quality (U.S. government agencies and government sponsored enterprises and “A” rated or better Kentucky municipalities), management does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery.

Mortgage-backed Securities

At September 30, 2012, 100% of the mortgage-backed securities held by the Bank were issued by U.S. government sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because a decline in market value would be attributable to changes in interest rates and illiquidity, and not credit quality, and because the Bank does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Bank does not consider these securities to be other than temporarily impaired at September 30, 2012.

At September 30, 2012 and December 31, 2011, securities with a carrying value of $327,242,000 and $342,288,000 were pledged to secure public deposits and repurchase agreements.

Securities with unrealized losses at September 30, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (in thousands):

	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Description of Securities	Value		Loss			Value		Loss			Value		Loss
September 30, 2012
U.S. government, federal agencies and government sponsored enterprises	$	4,992	$	(23	)	$	-	$	-		$	4,992	$	(23	)
Municipal & other obligations		5,518		(108	)		-		-			5,518		(108	)
Total temporarily impaired	$	10,510	$	(131	)	$	-	$	-		$	10,510	$	(131	)
December 31, 2011
U.S. government, federal agencies and government sponsored enterprises	$	18,734	$	(12	)	$	-	$	-		$	18,734	$	(12	)
U.S government residential mortgage-backed		36,707		(64	)		-		-			36,707		(64	)
Municipal & other obligations		3,225		(24	)		388		(1	)		3,613		(25	)
Total temporarily impaired	$	58,666	$	(100	)	$	388	$	(1	)	$	59,054	$	(101	)

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Reclassification

9 Months Ended

Sep. 30, 2012

Equity [Abstract]

Reclassification

Note 6 – Reclassification:

Certain prior period amounts have been reclassified to conform to the current period presentation.Such reclassifications have no effect on previously reported net income or shareholders’ equity.

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New Accounting Pronouncements

9 Months Ended

Sep. 30, 2012

Accounting Changes and Error Corrections [Abstract]

New Accounting Pronouncements

Note 7 – New Accounting Pronouncements:

In May 2011, the Financial Accounting Standards Board (“FASB”) issued an amendment to achieve common fair value measurement and disclosure requirements between U.S. and International accounting principles. Overall, the guidance is consistent with existing U.S. accounting principles; however, there are some amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This update became effective for the Company for interim and annual reporting periods beginning after December 15, 2011 and did not have a material impact on the Company''''s consolidated financial position or results of operations.

In June 2011, the FASB amended existing guidance and eliminated the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. The amendment requires that comprehensive income be presented in either a single continuous statement or in two separate consecutive statements. This update became effective for the Company for interim and annual reporting periods beginning after December 15, 2011 and did not have a material impact on the Company''''s consolidated financial position or results of operations.

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Loans

9 Months Ended

Sep. 30, 2012

Receivables [Abstract]

Loans

Note 9 - Loans

Loan balances were as follows (in thousands):

	9/30/2012			12/31/2011
Commercial	$	181,170		$	193,176
Residential real estate		281,745			266,268
Nonresidential real estate		555,234			523,485
Construction		98,609			104,788
Consumer		16,170			16,618
Municipal obligations		27,603			27,066
Gross loans		1,160,531			1,131,401
Less: Deferred loan origination fees and discount		(1,457	)		(1,447	)
Allowance for loan losses		(16,585	)		(18,288	)
Net loans	$	1,142,489		$	1,111,666

The following tables present the activity in the allowance for loan losses for the three months ending September 30, 2012 and 2011, 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 September 30, 2011 (in thousands):

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations			Total
September 30, 2012
Allowance for loan losses
Beginning balance	$	2,159		$	3,786		$	6,666		$	5,167		$	392		$	176		$	18,346
Provision for loan losses		(215	)		2,095			875			(729	)		325			(151	)		2,200
Loans charged off		(89	)		(1,051	)		(436	)		(2,292	)		(371	)		-			(4,239	)
Recoveries		18			3			183			2			72			-			278
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25		$	16,585
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	317		$	1,729		$	2,993		$	1,215		$	-		$	-		$	6,254
Collectively evaluated for impairment		1,556			3,104			4,295			933			418			25			10,331
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25		$	16,585
Loans
Loans individually evaluated for impairment	$	1,118		$	8,500		$	19,111		$	5,774		$	-		$	-		$	34,503
Loans collectively evaluated for impairment		180,052			273,245			536,123			92,835			16,170			27,603			1,126,028
Total ending loans balance	$	181,170		$	281,745		$	555,234		$	98,609		$	16,170		$	27,603		$	1,160,531

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations			Total
September 30, 2011
Allowance for loan losses
Beginning balance	$	3,931		$	2,403		$	6,782		$	4,496		$	167		$	37		$	17,816
Provision for loan losses		262			384			1,590			181			154			(21	)		2,550
Loans charged off		(1,014	)		(210	)		(586	)		(501	)		(253	)		-			(2,564	)
Recoveries		28			2			16			-			93			-			139
Total ending allowance balance	$	3,207		$	2,579		$	7,802		$	4,176		$	161		$	16		$	17,941

The following tables present the activity in the allowance for loan losses for the nine months ending September 30, 2012 and 2011, 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 September 30, 2012 and December 31, 2011 (in thousands):

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations		Total
September 30, 2012
Allowance for loan losses
Beginning balance	$	3,207		$	2,591		$	7,614		$	4,701		$	162		$	13	$	18,288
Provision for loan losses		(892	)		3,782			1,095			977			726			12		5,700
Loans charged off		(461	)		(1,573	)		(1,609	)		(3,538	)		(696	)		-		(7,877	)
Recoveries		19			33			188			8			226			-		474
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25	$	16,585
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	317		$	1,729		$	2,993		$	1,215		$	-		$	-	$	6,254
Collectively evaluated for impairment		1,556			3,104			4,295			933			418			25		10,331
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25	$	16,585
Loans
Loans individually evaluated for impairment	$	1,118		$	8,500		$	19,111		$	5,774		$	-		$	-	$	34,503
Loans collectively evaluated for impairment		180,052			273,245			536,123			92,835			16,170			27,603		1,126,028
Total ending loans balance	$	181,170		$	281,745		$	555,234		$	98,609		$	16,170		$	27,603	$	1,160,531

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations			Total
September 30, 2011
Allowance for loan losses
Beginning balance	$	3,440		$	2,431		$	8,126		$	3,150		$	166		$	55		$	17,368
Provision for loan losses		1,649			780			2,728			3,025			407			(39	)		8,550
Loans charged off		(1,934	)		(674	)		(3,070	)		(2,000	)		(715	)		-			(8,393	)
Recoveries		52			42			18			1			303			-			416
Total ending allowance balance	$	3,207		$	2,579		$	7,802		$	4,176		$	161		$	16		$	17,941

					Non
			Residential		Residential						Municipal
	Commercial		Real estate		Real estate		Construction		Consumer		Obligations		Total
December 31, 2011
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	224	$	477	$	2,994	$	3,748	$	-	$	-	$	7,443
Collectively evaluated for impairment		2,983		2,114		4,620		953		162		13		10,845
	$	3,207	$	2,591	$	7,614	$	4,701	$	162	$	13	$	18,288
Loans
Loans individually evaluated for impairment	$	917	$	6,100	$	20,390	$	7,854	$	-	$	-	$	35,261
Loans collectively evaluated for impairment		192,259		260,168		503,095		96,934		16,618		27,066		1,096,140
Total ending loans balance	$	193,176	$	266,268	$	523,485	$	104,788	$	16,618	$	27,066	$	1,131,401

The following table presents individually impaired loans by class of loans as of and for the three months ended September 30, 2012 (in thousands):

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	30	$	30	$	-	$	170	$	-	$	-
Residential real estate
Home equity lines of credit		50		50		-		50		-		-
Multifamily properties		379		48		-		24		-		-
Other		2,869		2,626		-		2,336		-		-
Nonresidential real estate
Owner occupied properties		802		792		-		490		-		-
Non owner occupied properties		6,206		5,701		-		3,797		-		-
Construction		809		509		-		432		-		-
With an allowance recorded
Commercial		1,088		1,088		317		823		4		4
Residential real estate
Home equity lines of credit		1,488		1,488		1,341		813		12		12
Multifamily properties		1,324		1,324		243		1,554		11		11
Other		3,109		2,964		145		3,309		31		24
Nonresidential real estate
Owner occupied properties		8,544		8,543		2,651		8,774		81		81
Non owner occupied properties		4,595		4,074		342		6,449		34		34
Construction		6,387		5,266		1,215		6,494		45		45
Total	$	37,680	$	34,503	$	6,254	$	35,515	$	218	$	211

The following table presents individually impaired loans by class of loans as of and for the nine months ended September 30, 2012 (in thousands):

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	30	$	30	$	-	$	263	$	-	$	-
Residential real estate
Home equity lines of credit		50		50		-		50		-		-
Multifamily properties		379		48		-		273		-		-
Other		2,869		2,626		-		2,094		-		-
Nonresidential real estate
Owner occupied properties		802		792		-		698		-		-
Non owner occupied properties		6,206		5,701		-		2,848		-		-
Construction		809		509		-		256		-		-
With an allowance recorded
Commercial		1,088		1,088		317		950		7		5
Residential real estate
Home equity lines of credit		1,488		1,488		1,341		339		12		12
Multifamily properties		1,324		1,324		243		815		22		22
Other		3,109		2,964		145		3,557		76		64
Nonresidential real estate
Owner occupied properties		8,544		8,543		2,651		9,081		239		237
Non owner occupied properties		4,595		4,074		342		7,406		143		106
Construction		6,387		5,266		1,215		8,017		163		155
Total	$	37,680	$	34,503	$	6,254	$	36,647	$	662	$	601

The following table presents individually impaired loans by class of loans as of, and for the three months ended September 30, 2011:

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	349	$	310	$	-	$	371	$	-	$	-
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		-		-		-		-		-		-
Other		2,121		2,121		-		2,325		-		-
Nonresidential real estate
Owner occupied properties		1,011		955		-		587		-		-
Non owner occupied properties		897		897		-		1,044		-		-
Construction		2,036		889		-		909		-		-
With an allowance recorded
Commercial		1,379		1,379		504		2,370		10		5
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		868		868		291		869		14		9
Other		2,869		2,850		433		2,755		18		17
Nonresidential real estate
Owner occupied properties		9,471		9,348		1,093		5,123		80		25
Non owner occupied properties		13,667		11,830		2,185		9,870		90		90
Construction		8,962		7,726		3,256		8,459		76		75
Total	$	43,630	$	39,173	$	7,762	$	34,682	$	288	$	221

The following table presents individually impaired loans by class of loans as of and for the nine months ended September 30, 2011 (in thousands):

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	349	$	310	$	-	$	351	$	-	$	-
Residential real estate
Home equity lines of credit		-		-		-		-		-		- -
Multifamily properties		-		-		-		17		-		-
Other		2,121		2,121		-		1,288		-		-
Nonresidential real estate
Owner occupied properties		1,011		955		-		503		-		-
Non owner occupied properties		897		897		-		848		-		-
Construction		2,036		889		-		559		-		-
With an allowance recorded
Commercial		1,379		1,379		504		1,959		17		9
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		868		868		291		922		42		28
Other		2,869		2,850		433		2,441		54		51
Nonresidential real estate
Owner occupied properties		9,471		9,348		1,093		2,884		81		26
Non owner occupied properties		13,667		11,830		2,185		10,044		215		210
Construction		8,962		7,726		3,256		8,035		203		189
Total	$	43,630	$	39,173	$	7,762	$	29,851	$	612	$	513

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2011 (in thousands):

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance		Investment		Allocated
With no related allowance recorded
Commercial	$	350	$	310	$	-
Residential real estate
Home equity lines of credit		50		50		-
Multifamily properties		538		538		-
Other		1,703		1,703		-
Nonresidential real estate
Owner occupied properties		1,101		1,101		-
Non owner occupied properties		2,122		2,116		-
Construction		356		319		-
With an allowance recorded
Commercial		733		607		224
Residential real estate
Home equity lines of credit		-		-		-
Multifamily properties		-		-		-
Other		3,859		3,809		477
Nonresidential real estate
Owner occupied properties		10,771		9,798		1,477
Non owner occupied properties		8,476		7,375		1,517
Construction		8,267		7,535		3,748
Total	$	38,326	$	35,261	$	7,443

The following table presents the aging of the recorded investment in past due loans by class of loans as of September 30, 2012 and December 31, 2011 (in thousands):

	Loans		Loans over
	30-90 days		90 days				Loans not
	past due		past due		Nonaccrual		past due		Total
September 30, 2012
Commercial	$	599	$	-	$	968	$	179,603	$	181,170
Residential real estate
Home equity lines of credit		827		39		768		98,658		100,292
Multifamily properties		111		-		48		46,624		46,783
Other residential real estate		3,657		-		3,676		127,337		134,670
Nonresidential real estate
Owner occupied properties		3,591		-		1,368		273,240		278,199
Non owner occupied properties		1,881		-		6,305		268,849		277,035
Construction		737		-		1,601		96,271		98,609
Consumer
Credit card balances		32		66		-		6,399		6,497
Other consumer		13		-		79		9,581		9,673
Municipal obligations		-		-		-		27,603		27,603
Total	$	11,448	$	105	$	14,813	$	1,134,165	$	1,160,531

	Loans		Loans over
	30-90 days		90 days				Loans not
	past due		past due		Nonaccrual		past due		Total
December 31, 2011
Commercial	$	692	$	74	$	1,175	$	191,235	$	193,176
Residential real estate
Home equity lines of credit		1,094		-		910		92,676		94,680
Multifamily properties		-		-		-		36,756		36,756
Other residential real estate		5,854		112		4,415		124,451		134,832
Nonresidential real estate
Owner occupied properties		2,623		-		2,270		247,875		252,768
Non owner occupied properties		3,942		-		4,358		262,417		270,717
Construction		265		-		1,897		102,626		104,788
Consumer
Credit card balances		60		32		-		6,400		6,492
Other consumer		37		1		626		9,462		10,126
Municipal obligations		-		-		-		27,066		27,066
Total	$	14,567	$	219	$	15,651	$	1,100,964	$	1,131,401

Troubled Debt Restructurings:

The Company has allocated $2,837,000 and $2,074,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2012 and December 31, 2011, respectively. Troubled debt restructurings totaled $17,129,911 and $15,229,000 as of September 30, 2012 and December 31, 2011, respectively.The Company has not committed to lend additional amounts as of September 30, 2012 and December 31, 2011 to customers with outstanding loans that are classified as troubled debt restructurings.

Modifications involving a reduction of the stated interest rate of the loan were for periods up to three years. Modifications involving an extension of the maturity date were for periods ranging from eight months to twelve months.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ending September 30, 2012 and 2011:

	2012						2011
	Number Of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number Of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial		1	$	31,757	$	29,979		-	$	-	$	-
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		-		-		-		-		-		-
Other residential real estate		-		-		-		1		568,000		568,000
Nonresidential real estate
Owner occupied properties		-		-		-		1		1,700,000		1,700,000
Non owner occupied properties		-		-		-		-		-		-
Construction		-		-		-		-		-		-
Consumer
Credit card balances		-		-		-		-		-		-
Other consumer		-		-		-		-		-		-
Municipal obligations		-		-		-		-		-		-
Total		1	$	31,757	$	29,979		2	$	2,268,000	$	2,268,000

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ending September 30, 2012 and 2011:

	2012						2011
	Number Of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number Of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial		2	$	190,168	$	184,336		-	$	-	$	-
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		1		485,000		48,238		-		-		-
Other residential real estate		1		187,105		186,074		1		568,000		568,000
Nonresidential real estate
Owner occupied properties		1		153,891		153,891		1		1,700,000		1,700,000
Non owner occupied properties		-		-		-		3		10,881,848		10,839,519
Construction		5		3,204,872		2,957,005		-		-		-
Consumer
Credit card balances		-		-		-		-		-		-
Other consumer		-		-		-		-		-		-
Municipal obligations		-		-		-		-		-		-
Total		10	$	4,221,036	$	3,529,544		5	$	13,149,848	$	13,107,519

The troubled debt restructurings described above increased the allowance for loan losses by $2,871 and resulted in charge-offs of $0 during the third quarter ending September 30, 2012 and charge offs of $1,112,147 for the nine months ending September 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 during the period ending September 30, 2012:

Troubled Debt Restructurings
That Subsequently Defaulted:	Number of Loans		Recorded Investment
Commercial		1	$	154,357
Residential real estate
Home equity lines of credit
Multifamily properties		1		48,238
Other residential real estate		1		465,293
Nonresidential real estate
Owner occupied properties
Non owner occupied properties		3		3,234,737
Construction		2		1,616,100
Consumer
Credit card balances
Other consumer
Municipal obligations		-		-
Total		8	$	5,518,725

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 $0 and resulted in charge-offs of $477,091 during the third quarter ending September 30, 2012 and $1,739,238 for the nine months ending September 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, including: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans with an outstanding balance greater than $100,000 and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. Loans with balances below $100,000 and homogenous loans, such as residential real estate and consumer loans, are analyzed for credit quality based on aging status, which was previously presented. 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 institution 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 characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

			Special
	Pass		Mention		Substandard		Doubtful		Not Rated(1)		Total
September 30, 2012
Commercial	$	166,935	$	10,448	$	3,787	$	-	$	-	$	181,170
Residential real estate
Home equity lines of credit		11,827		781		1,953		-		85,731		100,292
Multifamily properties		45,311		100		1,372		-		-		46,783
Other residential real estate		40,607		1,143		10,496		-		82,424		134,670
Nonresidential real estate
Owner occupied properties		248,156		10,909		19,134		-		-		278,199
Non owner occupied properties		255,141		7,304		14,590		-		-		277,035
Construction		87,924		2,264		8,421		-		-		98,609
Consumer
Credit card balances		-		-		-		-		6,497		6,497
Other consumer		-		-		19		-		9,654		9,673
Municipal obligations		27,603		-		-		-		-		27,603
Total	$	883,504	$	32,949	$	59,772	$	0	$	184,306	$	1,160,531

(1) Not rated loans represent the homogenous pools risk category.

			Special
	Pass		Mention		Substandard		Doubtful		Not Rated(1)		Total
December 31, 2011
Commercial	$	170,394	$	9,684	$	13,098	$	-	$	-	$	193,176
Residential real estate
Home equity lines of credit		-		712		976		84		92,908		94,680
Multifamily properties		36,115		103		538		-		-		36,756
Other residential real estate		38,725		1,357		10,843		-		83,907		134,832
Nonresidential real estate
Owner occupied properties		221,941		7,754		23,073		-		-		252,768
Non owner occupied properties		246,614		8,902		15,201		-		-		270,717
Construction		90,297		3,398		11,093		-		-		104,788
Consumer
Credit card balances		-		-		-		-		6,492		6,492
Other consumer		-		-		22		-		10,104		10,126
Municipal obligations		27,066		-		-		-		-		27,066
Total	$	831,152	$	31,910	$	74,844	$	84	$	193,411	$	1,131,401

(1) Not rated loans represent the homogenous pools risk category.

XML

Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment and Based on Impairment Method (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Allowance for loan losses
Beginning balance	$ 18,346	$ 17,816	$ 18,288	$ 17,368
Provision for loan losses	2,200	2,550	5,700	8,550
Loans charged off	(4,239)	(2,564)	(7,877)	(8,393)
Recoveries	278	139	474	416
Ending balance	16,585	17,941	16,585	17,941
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Individually evaluated for impairment	6,254	7,762	6,254	7,762	7,443
Collectively evaluated for impairment	10,331		10,331		10,845
Total ending allowance balance	16,585	17,941	16,585	17,941
Loans
Loans individually evaluated for impairment	34,503	39,173	34,503	39,173	35,261
Loans collectively evaluated for impairment	1,126,028		1,126,028		1,096,140
Total	1,160,531		1,160,531		1,131,401
Commercial [Member]
Allowance for loan losses
Beginning balance	2,159	3,931	3,207	3,440
Provision for loan losses	(215)	262	(892)	1,649
Loans charged off	(89)	1,014	(461)	(1,934)
Recoveries	18	28	19	52
Ending balance	1,873	3,207	1,873	3,207
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Individually evaluated for impairment	317		317		224
Collectively evaluated for impairment	1,556		1,556		2,983
Total ending allowance balance	1,873	3,207	1,873	3,207
Loans
Loans individually evaluated for impairment	1,118		1,118		917
Loans collectively evaluated for impairment	180,052		180,052		192,259
Total	181,170		181,170		193,176
Residential Real Estate [Member]
Allowance for loan losses
Beginning balance	3,786	2,403	2,591	2,431
Provision for loan losses	2,095	384	3,782	780
Loans charged off	(1,051)	(210)	(1,573)	(674)
Recoveries	3	2	33	42
Ending balance	4,833	2,579	4,833	2,579
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Individually evaluated for impairment	1,729		1,729		477
Collectively evaluated for impairment	3,104		3,104		2,114
Total ending allowance balance	4,833	2,579	4,833	2,579
Loans
Loans individually evaluated for impairment	8,500		8,500		6,100
Loans collectively evaluated for impairment	273,245		273,245		260,168
Total	281,745		281,745		266,268
Nonresidential Real Estate [Member]
Allowance for loan losses
Beginning balance	6,666	6,782	7,614	8,126
Provision for loan losses	875	1,590	1,095	2,728
Loans charged off	(436)	(586)	(1,609)	(3,070)
Recoveries	183	16	188	18
Ending balance	7,288	7,802	7,288	7,802
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Individually evaluated for impairment	2,993		2,993		2,994
Collectively evaluated for impairment	4,295		4,295		4,620
Total ending allowance balance	7,288	7,802	7,288	7,802
Loans
Loans individually evaluated for impairment	19,111		19,111		20,390
Loans collectively evaluated for impairment	536,123		536,123		503,095
Total	555,234		555,234		523,485
Construction [Member]
Allowance for loan losses
Beginning balance	5,167	4,496	4,701	3,150
Provision for loan losses	(729)	181	977	3,025
Loans charged off	(2,292)	(501)	(3,538)	(2,000)
Recoveries	2	0	8	1
Ending balance	2,148	4,176	2,148	4,176
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Individually evaluated for impairment	1,215		1,215		3,748
Collectively evaluated for impairment	933		933		953
Total ending allowance balance	2,148	4,176	2,148	4,176
Loans
Loans individually evaluated for impairment	5,774		5,774		7,854
Loans collectively evaluated for impairment	92,835		92,835		96,934
Total	98,609		98,609		104,788
Consumer [Member]
Allowance for loan losses
Beginning balance	392	167	162	166
Provision for loan losses	325	154	726	407
Loans charged off	(371)	(253)	(696)	(715)
Recoveries	72	93	226	303
Ending balance	418	161	418	161
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Individually evaluated for impairment	0		0		0
Collectively evaluated for impairment	418		418		162
Total ending allowance balance	418	161	418	161
Loans
Loans individually evaluated for impairment	0		0		0
Loans collectively evaluated for impairment	16,170		16,170		16,618
Total	16,170		16,170		16,618
Municipal Obligations [Member]
Allowance for loan losses
Beginning balance	176	37	13	55
Provision for loan losses	(151)	(21)	12	(39)
Loans charged off	0	0	0	0
Recoveries	0	0	0	0
Ending balance	25	16	25	16
Financing Receivable Allowance For Credit Loss Additional Information [Abstract]
Individually evaluated for impairment	0		0		0
Collectively evaluated for impairment	25		25		13
Total ending allowance balance	25	16	25	16
Loans
Loans individually evaluated for impairment	0		0		0
Loans collectively evaluated for impairment	27,603		27,603		27,066
Total	$ 27,603		$ 27,603		$ 27,066

XML

Loans (Tables)

9 Months Ended

Sep. 30, 2012

Receivables [Abstract]

Loan Balances

Loan balances were as follows (in thousands):

	9/30/2012			12/31/2011
Commercial	$	181,170		$	193,176
Residential real estate		281,745			266,268
Nonresidential real estate		555,234			523,485
Construction		98,609			104,788
Consumer		16,170			16,618
Municipal obligations		27,603			27,066
Gross loans		1,160,531			1,131,401
Less: Deferred loan origination fees and discount		(1,457	)		(1,447	)
Allowance for loan losses		(16,585	)		(18,288	)
Net loans	$	1,142,489		$	1,111,666

Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment and Based on Impairment Method

The following tables present the activity in the allowance for loan losses for the three months ending September 30, 2012 and 2011, 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 September 30, 2011 (in thousands):

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations			Total
September 30, 2012
Allowance for loan losses
Beginning balance	$	2,159		$	3,786		$	6,666		$	5,167		$	392		$	176		$	18,346
Provision for loan losses		(215	)		2,095			875			(729	)		325			(151	)		2,200
Loans charged off		(89	)		(1,051	)		(436	)		(2,292	)		(371	)		-			(4,239	)
Recoveries		18			3			183			2			72			-			278
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25		$	16,585
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	317		$	1,729		$	2,993		$	1,215		$	-		$	-		$	6,254
Collectively evaluated for impairment		1,556			3,104			4,295			933			418			25			10,331
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25		$	16,585
Loans
Loans individually evaluated for impairment	$	1,118		$	8,500		$	19,111		$	5,774		$	-		$	-		$	34,503
Loans collectively evaluated for impairment		180,052			273,245			536,123			92,835			16,170			27,603			1,126,028
Total ending loans balance	$	181,170		$	281,745		$	555,234		$	98,609		$	16,170		$	27,603		$	1,160,531

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations			Total
September 30, 2011
Allowance for loan losses
Beginning balance	$	3,931		$	2,403		$	6,782		$	4,496		$	167		$	37		$	17,816
Provision for loan losses		262			384			1,590			181			154			(21	)		2,550
Loans charged off		(1,014	)		(210	)		(586	)		(501	)		(253	)		-			(2,564	)
Recoveries		28			2			16			-			93			-			139
Total ending allowance balance	$	3,207		$	2,579		$	7,802		$	4,176		$	161		$	16		$	17,941

The following tables present the activity in the allowance for loan losses for the nine months ending September 30, 2012 and 2011, 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 September 30, 2012 and December 31, 2011 (in thousands):

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations		Total
September 30, 2012
Allowance for loan losses
Beginning balance	$	3,207		$	2,591		$	7,614		$	4,701		$	162		$	13	$	18,288
Provision for loan losses		(892	)		3,782			1,095			977			726			12		5,700
Loans charged off		(461	)		(1,573	)		(1,609	)		(3,538	)		(696	)		-		(7,877	)
Recoveries		19			33			188			8			226			-		474
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25	$	16,585
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	317		$	1,729		$	2,993		$	1,215		$	-		$	-	$	6,254
Collectively evaluated for impairment		1,556			3,104			4,295			933			418			25		10,331
Total ending allowance balance	$	1,873		$	4,833		$	7,288		$	2,148		$	418		$	25	$	16,585
Loans
Loans individually evaluated for impairment	$	1,118		$	8,500		$	19,111		$	5,774		$	-		$	-	$	34,503
Loans collectively evaluated for impairment		180,052			273,245			536,123			92,835			16,170			27,603		1,126,028
Total ending loans balance	$	181,170		$	281,745		$	555,234		$	98,609		$	16,170		$	27,603	$	1,160,531

							Non
				Residential			Residential									Municipal
	Commercial			Real estate			Real estate			Construction			Consumer			Obligations			Total
September 30, 2011
Allowance for loan losses
Beginning balance	$	3,440		$	2,431		$	8,126		$	3,150		$	166		$	55		$	17,368
Provision for loan losses		1,649			780			2,728			3,025			407			(39	)		8,550
Loans charged off		(1,934	)		(674	)		(3,070	)		(2,000	)		(715	)		-			(8,393	)
Recoveries		52			42			18			1			303			-			416
Total ending allowance balance	$	3,207		$	2,579		$	7,802		$	4,176		$	161		$	16		$	17,941

					Non
			Residential		Residential						Municipal
	Commercial		Real estate		Real estate		Construction		Consumer		Obligations		Total
December 31, 2011
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	224	$	477	$	2,994	$	3,748	$	-	$	-	$	7,443
Collectively evaluated for impairment		2,983		2,114		4,620		953		162		13		10,845
	$	3,207	$	2,591	$	7,614	$	4,701	$	162	$	13	$	18,288
Loans
Loans individually evaluated for impairment	$	917	$	6,100	$	20,390	$	7,854	$	-	$	-	$	35,261
Loans collectively evaluated for impairment		192,259		260,168		503,095		96,934		16,618		27,066		1,096,140
Total ending loans balance	$	193,176	$	266,268	$	523,485	$	104,788	$	16,618	$	27,066	$	1,131,401

Individually Impaired Loans by Class of Loans

The following table presents individually impaired loans by class of loans as of and for the three months ended September 30, 2012 (in thousands):

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	30	$	30	$	-	$	170	$	-	$	-
Residential real estate
Home equity lines of credit		50		50		-		50		-		-
Multifamily properties		379		48		-		24		-		-
Other		2,869		2,626		-		2,336		-		-
Nonresidential real estate
Owner occupied properties		802		792		-		490		-		-
Non owner occupied properties		6,206		5,701		-		3,797		-		-
Construction		809		509		-		432		-		-
With an allowance recorded
Commercial		1,088		1,088		317		823		4		4
Residential real estate
Home equity lines of credit		1,488		1,488		1,341		813		12		12
Multifamily properties		1,324		1,324		243		1,554		11		11
Other		3,109		2,964		145		3,309		31		24
Nonresidential real estate
Owner occupied properties		8,544		8,543		2,651		8,774		81		81
Non owner occupied properties		4,595		4,074		342		6,449		34		34
Construction		6,387		5,266		1,215		6,494		45		45
Total	$	37,680	$	34,503	$	6,254	$	35,515	$	218	$	211

The following table presents individually impaired loans by class of loans as of and for the nine months ended September 30, 2012 (in thousands):

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	30	$	30	$	-	$	263	$	-	$	-
Residential real estate
Home equity lines of credit		50		50		-		50		-		-
Multifamily properties		379		48		-		273		-		-
Other		2,869		2,626		-		2,094		-		-
Nonresidential real estate
Owner occupied properties		802		792		-		698		-		-
Non owner occupied properties		6,206		5,701		-		2,848		-		-
Construction		809		509		-		256		-		-
With an allowance recorded
Commercial		1,088		1,088		317		950		7		5
Residential real estate
Home equity lines of credit		1,488		1,488		1,341		339		12		12
Multifamily properties		1,324		1,324		243		815		22		22
Other		3,109		2,964		145		3,557		76		64
Nonresidential real estate
Owner occupied properties		8,544		8,543		2,651		9,081		239		237
Non owner occupied properties		4,595		4,074		342		7,406		143		106
Construction		6,387		5,266		1,215		8,017		163		155
Total	$	37,680	$	34,503	$	6,254	$	36,647	$	662	$	601

The following table presents individually impaired loans by class of loans as of, and for the three months ended September 30, 2011:

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	349	$	310	$	-	$	371	$	-	$	-
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		-		-		-		-		-		-
Other		2,121		2,121		-		2,325		-		-
Nonresidential real estate
Owner occupied properties		1,011		955		-		587		-		-
Non owner occupied properties		897		897		-		1,044		-		-
Construction		2,036		889		-		909		-		-
With an allowance recorded
Commercial		1,379		1,379		504		2,370		10		5
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		868		868		291		869		14		9
Other		2,869		2,850		433		2,755		18		17
Nonresidential real estate
Owner occupied properties		9,471		9,348		1,093		5,123		80		25
Non owner occupied properties		13,667		11,830		2,185		9,870		90		90
Construction		8,962		7,726		3,256		8,459		76		75
Total	$	43,630	$	39,173	$	7,762	$	34,682	$	288	$	221

The following table presents individually impaired loans by class of loans as of and for the nine months ended September 30, 2011 (in thousands):

	Unpaid				Allowance for		Average		Interest
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Received
With no related allowance recorded
Commercial	$	349	$	310	$	-	$	351	$	-	$	-
Residential real estate
Home equity lines of credit		-		-		-		-		-		- -
Multifamily properties		-		-		-		17		-		-
Other		2,121		2,121		-		1,288		-		-
Nonresidential real estate
Owner occupied properties		1,011		955		-		503		-		-
Non owner occupied properties		897		897		-		848		-		-
Construction		2,036		889		-		559		-		-
With an allowance recorded
Commercial		1,379		1,379		504		1,959		17		9
Residential real estate
Home equity lines of credit		-		-		-		-		-		-
Multifamily properties		868		868		291		922		42		28
Other		2,869		2,850		433		2,441		54		51
Nonresidential real estate
Owner occupied properties		9,471		9,348		1,093		2,884		81		26
Non owner occupied properties		13,667		11,830		2,185		10,044		215		210
Construction		8,962		7,726		3,256		8,035		203		189
Total	$	43,630	$	39,173	$	7,762	$	29,851	$	612	$	513

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2011 (in thousands):

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
	Balance		Investment		Allocated
With no related allowance recorded
Commercial	$	350	$	310	$	-
Residential real estate
Home equity lines of credit		50		50		-
Multifamily properties		538		538		-
Other		1,703		1,703		-
Nonresidential real estate
Owner occupied properties		1,101		1,101		-
Non owner occupied properties		2,122		2,116		-
Construction		356		319		-
With an allowance recorded
Commercial		733		607		224
Residential real estate
Home equity lines of credit		-		-		-
Multifamily properties		-		-		-
Other		3,859		3,809		477
Nonresidential real estate
Owner occupied properties		10,771		9,798		1,477
Non owner occupied properties		8,476		7,375		1,517
Construction		8,267		7,535		3,748
Total	$	38,326	$	35,261	$	7,443

Aging of Recorded Investment in Past Due Loans by Class of Loans

The following table presents the aging of the recorded investment in past due loans by class of loans as of September 30, 2012 and December 31, 2011 (in thousands):

	Loans		Loans over
	30-90 days		90 days				Loans not
	past due		past due		Nonaccrual		past due		Total
September 30, 2012
Commercial	$	599	$	-	$	968	$	179,603	$	181,170
Residential real estate
Home equity lines of credit		827		39		768		98,658		100,292
Multifamily properties		111		-		48		46,624		46,783
Other residential real estate		3,657		-		3,676		127,337		134,670
Nonresidential real estate
Owner occupied properties		3,591		-		1,368		273,240		278,199
Non owner occupied properties		1,881		-		6,305		268,849		277,035
Construction		737		-		1,601		96,271		98,609
Consumer
Credit card balances		32		66		-		6,399		6,497
Other consumer		13		-		79		9,581		9,673
Municipal obligations		-		-		-		27,603		27,603
Total	$	11,448	$	105	$	14,813	$	1,134,165	$	1,160,531

	Loans		Loans over
	30-90 days		90 days				Loans not
	past due		past due		Nonaccrual		past due		Total
December 31, 2011
Commercial	$	692	$	74	$	1,175	$	191,235	$	193,176
Residential real estate
Home equity lines of credit		1,094		-		910		92,676		94,680
Multifamily properties		-		-		-		36,756		36,756
Other residential real estate		5,854		112		4,415		124,451		134,832
Nonresidential real estate
Owner occupied properties		2,623		-		2,270		247,875		252,768
Non owner occupied properties		3,942		-		4,358		262,417		270,717
Construction		265		-		1,897		102,626		104,788
Consumer
Credit card balances		60		32		-		6,400		6,492
Other consumer		37		1		626		9,462		10,126
Municipal obligations		-		-		-		27,066		27,066
Total	$	14,567	$	219	$	15,651	$	1,100,964	$	1,131,401

Loans by Class Modified as Troubled Debt Restructurings

			Pre-Modification		Post-Modification
			Outstanding Recorded		Outstanding Recorded
	Number of Loans		Investment		Investment
Troubled Debt Restructurings:
Commercial		2	$	190,168	$	184,336
Residential real estate
Home equity lines of credit		-		-		-
Multifamily properties		1		485,000		48,238
Other residential real estate		1		187,105		186,074
Nonresidential real estate
Owner occupied properties		1		153,891		153,891
Non owner occupied properties		-		-		-
Construction		5		3,204,872		2,957,006
Consumer
Credit card balances		-		-		-
Other consumer		-		-		-
Municipal obligations		-		-		-
Total		10	$	4,221,036	$	3,529,544

Loans by Class Modified as Troubled Debt Restructurings for which there was Payment Default within Twelve Months Following Modification

Troubled Debt Restructurings
That Subsequently Defaulted:	Number of Loans		Recorded Investment
Commercial		1	$	154,357
Residential real estate
Home equity lines of credit
Multifamily properties		1		48,238
Other residential real estate		1		465,293
Nonresidential real estate
Owner occupied properties
Non owner occupied properties		3		3,234,737
Construction		2		1,616,100
Consumer
Credit card balances
Other consumer
Municipal obligations		-		-
Total		8	$	5,518,725

Risk Category of Loans by Class of Loans

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

			Special
	Pass		Mention		Substandard		Doubtful		Not Rated(1)		Total
September 30, 2012
Commercial	$	166,935	$	10,448	$	3,787	$	-	$	-	$	181,170
Residential real estate
Home equity lines of credit		11,827		781		1,953		-		85,731		100,292
Multifamily properties		45,311		100		1,372		-		-		46,783
Other residential real estate		40,607		1,143		10,496		-		82,424		134,670
Nonresidential real estate
Owner occupied properties		248,156		10,909		19,134		-		-		278,199
Non owner occupied properties		255,141		7,304		14,590		-		-		277,035
Construction		87,924		2,264		8,421		-		-		98,609
Consumer
Credit card balances		-		-		-		-		6,497		6,497
Other consumer		-		-		19		-		9,654		9,673
Municipal obligations		27,603		-		-		-		-		27,603
Total	$	883,504	$	32,949	$	59,772	$	0	$	184,306	$	1,160,531

(1) Not rated loans represent the homogenous pools risk category.

			Special
	Pass		Mention		Substandard		Doubtful		Not Rated(1)		Total
December 31, 2011
Commercial	$	170,394	$	9,684	$	13,098	$	-	$	-	$	193,176
Residential real estate
Home equity lines of credit		-		712		976		84		92,908		94,680
Multifamily properties		36,115		103		538		-		-		36,756
Other residential real estate		38,725		1,357		10,843		-		83,907		134,832
Nonresidential real estate
Owner occupied properties		221,941		7,754		23,073		-		-		252,768
Non owner occupied properties		246,614		8,902		15,201		-		-		270,717
Construction		90,297		3,398		11,093		-		-		104,788
Consumer
Credit card balances		-		-		-		-		6,492		6,492
Other consumer		-		-		22		-		10,104		10,126
Municipal obligations		27,066		-		-		-		-		27,066
Total	$	831,152	$	31,910	$	74,844	$	84	$	193,411	$	1,131,401

(1) Not rated loans represent the homogenous pools risk category.

XML

Summary Of Changes In The Company's Nonvested Shares (Details) (USD $)	9 Months Ended
	Sep. 30, 2012
Summary Of Changes In Company’S Nonvested Shares [Line Items]
Nonvested, Shares at January 1, 2012	0
Shares Granted	4,185
Shares Vested	0
Shares Forfeited	0
Shares Nonvested at September 30, 2012	4,185
Weighted-Average Grant-Date Fair Value Nonvested at January 1, 2012	$ 0
Weighted-Average Grant-Date Fair Value Granted	$ 25.80
Weighted-Average Grant-Date Fair Value Vested	$ 0
Weighted-Average Grant-Date Fair Value Forfeited	$ 0
Weighted-Average Grant-Date Fair Value Nonvested at September 30, 2012	$ 25.80

XML

Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Assets
Investment securities available-for-sale	$ 302,544	$ 322,512
Derivatives	1,841	1,349
Total	304,385	323,861
Liabilities
Derivatives	(1,841)	(1,349)
Total	1,841	1,349
US Treasury and Government [Member]
Assets
Investment securities available-for-sale	113,763	169,460
Residential Mortgage Backed Securities [Member]
Assets
Investment securities available-for-sale	187,721	151,992
Corporate Securities [Member]
Assets
Investment securities available-for-sale	1,060	1,060
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets
Derivatives	0	0
Total	0	0
Liabilities
Derivatives	0	0
Total	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | US Treasury and Government [Member]
Assets
Investment securities available-for-sale	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Residential Mortgage Backed Securities [Member]
Assets
Investment securities available-for-sale	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate Securities [Member]
Assets
Investment securities available-for-sale	0	0
Significant Other Observable Inputs (Level 2) [Member]
Assets
Derivatives	1,841	1,349
Total	303,325	322,801
Liabilities
Derivatives	(1,841)	(1,349)
Total	1,841	1,349
Significant Other Observable Inputs (Level 2) [Member] | US Treasury and Government [Member]
Assets
Investment securities available-for-sale	113,763	169,460
Significant Other Observable Inputs (Level 2) [Member] | Residential Mortgage Backed Securities [Member]
Assets
Investment securities available-for-sale	187,721	151,992
Significant Other Observable Inputs (Level 2) [Member] | Corporate Securities [Member]
Assets
Investment securities available-for-sale	0	0
Significant Unobservable Inputs (Level 3) [Member]
Assets
Derivatives	0	0
Total	1,060	1,060
Liabilities
Derivatives	0	0
Total	0	0
Significant Unobservable Inputs (Level 3) [Member] | US Treasury and Government [Member]
Assets
Investment securities available-for-sale	0	0
Significant Unobservable Inputs (Level 3) [Member] | Residential Mortgage Backed Securities [Member]
Assets
Investment securities available-for-sale	0	0
Significant Unobservable Inputs (Level 3) [Member] | Corporate Securities [Member]
Assets
Investment securities available-for-sale	$ 1,060	$ 1,060

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Beginning balance	$ 156,570	$ 159,370
Comprehensive income:
Net income	13,135	11,580
Change in net unrealized gain(loss), net of tax	1,691	2,969
Total comprehensive income	14,826	14,549
Cash dividends declared on common stock	(4,624)	(4,162)
Exercise of stock options (34,401 and 700 shares), including tax benefit	741	14
Stock-based compensation expense	108	152
Paid and accrued dividends on preferred stock	0	(637)
Balance as of September 30	$ 167,621	$ 169,286
Dividends per share	$ 0.62	$ 0.56

XML

Earnings per Share

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Earnings per Share

Note 3 - Earnings per Share:

Earnings per share are computed based upon the weighted average number of shares of common stock outstanding during the three and nine month periods. Diluted earnings per share show the potential dilutive effect of additional common shares issuable under the Company’s stock compensation plan and warrants. For the three months ended September 30, 2012 and 2011, 187,720 and 416,604 options were not considered, as they were not dilutive, and for the nine months ended September 30, 2012 and 2011, 264,389 and 354,616 options were not considered, as they were not dilutive. The following table presents the numbers of shares used to compute basic and diluted earnings per share for the indicated periods:

	Three Months Ended September 30				Nine Months Ended September 30
	2012		2011		2012		2011
Weighted average shares outstanding		7,465,926		7,432,995		7,459,988		7,432,762
Dilutive effects of assumed exercises of stock options, restricted stock units and warrants		88,133		55,748		77,415		41,332
Shares used to compute diluted earnings per share		7,554,059		7,488,743		7,537,403		7,474,094

XML

Cash and Cash Equivalents - Additional Information (Detail) (Maximum [Member])	9 Months Ended
	Sep. 30, 2012
Maximum [Member]
Cash and Cash Equivalents [Line Items]
Cash equivalents, maturity	90 days

XML

Loans by Class Modified as Troubled Debt Restructurings (Detail) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Financing Receivable, Modifications [Line Items]
Number of Loans	1	2	10	5
Pre-Modification Outstanding Recorded Investment	$ 31,757	$ 2,268,000	$ 4,221,036	$ 13,149,848
Post-Modification Outstanding Recorded Investment	29,979	2,268,000	3,529,544	13,107,519
Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	1	0	2	0
Pre-Modification Outstanding Recorded Investment	31,757	0	190,168	0
Post-Modification Outstanding Recorded Investment	29,979	0	184,336	0
Residential Real Estate [Member] | Home Equity Line of Credit [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	0	0
Pre-Modification Outstanding Recorded Investment	0	0	0	0
Post-Modification Outstanding Recorded Investment	0	0	0	0
Residential Real Estate [Member] | Multi Family [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	1	0
Pre-Modification Outstanding Recorded Investment	0	0	485,000	0
Post-Modification Outstanding Recorded Investment	0	0	48,238	0
Residential Real Estate [Member] | Residential Real Estate Other Financing Receivable [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	1	1	1
Pre-Modification Outstanding Recorded Investment	0	568,000	187,105	568,000
Post-Modification Outstanding Recorded Investment	0	568,000	186,074	568,000
Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Owner Occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	1	1	1
Pre-Modification Outstanding Recorded Investment	0	1,700,000	153,891,000	1,700,000
Post-Modification Outstanding Recorded Investment	0	1,700,000	153,891,000	1,700,000
Nonresidential Real Estate [Member] | Commercial Mortgage Loans, Non Owner Occupied [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	0	3
Pre-Modification Outstanding Recorded Investment	0	0	0	10,881,848
Post-Modification Outstanding Recorded Investment	0	0	0	10,839,519
Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	5	0
Pre-Modification Outstanding Recorded Investment	0	0	3,204,872	0
Post-Modification Outstanding Recorded Investment	0	0	2,957,005	0
Consumer [Member] | Consumer Credit Card Financing Receivable [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	0	0
Pre-Modification Outstanding Recorded Investment	0	0	0	0
Post-Modification Outstanding Recorded Investment	0	0	0	0
Consumer [Member] | Consumer Other Financing Receivable [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	0	0
Pre-Modification Outstanding Recorded Investment	0	0	0	0
Post-Modification Outstanding Recorded Investment	0	0	0	0
Municipal Obligations [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	0	0	0	0
Pre-Modification Outstanding Recorded Investment	0	0	0	0
Post-Modification Outstanding Recorded Investment	$ 0	$ 0	$ 0	$ 0

XML

Securities (Tables)

9 Months Ended

Sep. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Fair Value of Available for Sale Securities and Related Gains and Losses Recognized in Accumulated Other Comprehensive Income or loss

The fair value of available-for-sale securities and the related gains and losses recognized in accumulated other comprehensive income (loss) was as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Available-for-Sale	Cost		Gains		Losses			Value
September 30, 2012
U.S. government, federal agencies and government sponsored enterprises	$	112,473	$	1,313	$	(23	)	$	113,763
U.S. government residential mortgage-backed		181,429		6,292		-			187,721
Corporate		1,060		-		-			1,060
	$	294,962	$	7,605	$	(23	)	$	302,544

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
December 31, 2011
U.S. government, federal agencies and government sponsored enterprises	$	168,104	$	1,368	$	(12	)	$	169,460
U.S. government residential mortgage-backed		148,329		3,727		(64	)		151,992
Corporate		1,060		-		-			1,060
	$	317,493	$	5,095	$	(76	)	$	322,512

Amortized Cost, Unrecognized Gains and Losses, and Fair Value of Securities Held to Maturity

The carrying amount, unrecognized gains and losses, and fair value of securities held-to-maturity were as follows (in thousands):

			Gross		Gross
	Amortized		Unrecognized		Unrecognized			Fair
Held-to-Maturity	Cost		Gains		Losses			Value
2012
Municipal and other obligations	$	58,314	$	2,169	$	(108	)	$	60,375
2011
Municipal and other obligations	$	48,975	$	1,693	$	(25	)	$	50,643

Amortized Cost and Fair Value of Debt Securities by Contractual Maturity

The amortized cost and fair value of debt securities and carrying amount, if different, at September 30, 2012 by contractual maturity were as follows (in thousands), with securities not due at a single maturity date, primarily mortgage-backed securities, shown separately.

	Available-for-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	610	$	616	$	3,353	$	3,368
Due after one year through five years		51,409		52,076		29,592		30,780
Due after five years through ten years		60,454		61,071		19,444		20,302
Due after ten years		1,060		1,060		5,925		5,925
U.S. Governmentagency mortgage-backed		181,429		187,721		-		-
	$	294,962	$	302,544	$	58,314	$	60,375

Securities with Unrealized Losses Aggregated by Investment Category and Length of Time Individual Securities Have Been in Continuous Unrealized Loss Position

Securities with unrealized losses at September 30, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (in thousands):

	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Description of Securities	Value		Loss			Value		Loss			Value		Loss
September 30, 2012
U.S. government, federal agencies and government sponsored enterprises	$	4,992	$	(23	)	$	-	$	-		$	4,992	$	(23	)
Municipal & other obligations		5,518		(108	)		-		-			5,518		(18	)
Total temporarily impaired	$	10,510	$	(131	)	$	-	$	-		$	10,510	$	(131	)
December 31, 2011
U.S. government, federal agencies and government sponsored enterprises	$	18,734	$	(12	)	$	-	$	-		$	18,734	$	(12	)
U.S government residential mortgage-backed		36,707		(64	)		-		-			36,707		(64	)
Municipal & other obligations		3,225		(24	)		388		(1	)		3,613		(25	)
Total temporarily impaired	$	58,666	$	(100	)	$	388	$	(1	)	$	59,054	$	(101	)