CREDIT QUALITY INDICATORS

3 Months Ended

Mar. 31, 2013

Credit Quality Indicators [Abstract]

Credit Quality Indicators [Text Block]

NOTE 5 CREDIT QUALITY INDICATORS

As part of its monitoring process, the Corporation utilizes a risk rating system which quantifies the risk the Corporation estimates it has assumed when entering into a loan transaction and during the life of that loan. The system rates the strength of the borrower and the transaction and is designed to provide a program for risk management and early detection of problems. Loans are graded on a scale of 1 through 9, with a grade of 5 or below classified as “Pass” rated credits. Following is a description of the general characteristics of risk grades 6 through 9:

6 – Special Mention	The weighted overall risk associated with this credit is considered higher than normal (but still acceptable) or the loan possesses deficiencies which corrective action by the Bank would remedy, thereby reducing risk.
7 – Substandard	The weighted overall risk associated with this credit (based on each of the Bank’s creditworthiness criteria) is considered undesirable, the credit demonstrates a well-defined weakness or the Bank is inadequately protected and there exists the distinct possibility of sustaining some loss if not corrected.
8 – Doubtful	Weakness makes collection or liquidation in full (based on currently existing facts) improbable.
9 – Loss	This credit is of little value and not warranted as a bankable asset. Accordingly, the Bank does not carry any loans on the books that are graded 9 – loss, instead these loans are charged-off.

The Corporation’s strategy for credit risk management includes ongoing credit examinations and management reviews of loans exhibiting deterioration of credit quality. A deteriorating credit indicates an elevated likelihood of delinquency. When a loan becomes delinquent, its credit grade is reviewed and changed accordingly. Each downgrade to a classified credit results in a higher percentage of reserve to reflect the increased likelihood of loss for similarly graded credits. Further deterioration could result in a certain credit being deemed impaired resulting in a collateral valuation for purposes of establishing a specific reserve which reflects the possible extent of such loss for that credit.

The following tables present the risk category of loans by class of loans based on the most recent analysis performed at March 31, 2013 and December 31, 2012.

Commercial Credit Exposure (Dollar amounts in thousands)

Credit risk profile by credit worthiness category

									Commercial				Commercial
	Commercial				Commercial				Real Estate				Real Estate
	Operating				Agricultural				1-4 Family				Other
Category	03/31/13		12/31/12		03/31/13		12/31/12		03/31/13		12/31/12		03/31/13		12/31/12
Pass	$	24,571	$	27,636	$	28,842	$	32,416	$	35,699	$	36,248	$	85,179	$	78,586
6		0		0		0		0		0		0		2,485		4,667
7		1,558		1,388		0		0		2,777		2,812		6,115		9,793
8		0		0		0		0		0		0		0		0
Total	$	26,129	$	29,024	$	28,842	$	32,416	$	38,476	$	39,060	$	93,779	$	93,046

Residential Real Estate Credit Exposure (Dollar amounts in thousands)

Credit risk by credit worthiness category

	Residential				Residential
	Real Estate, Construction				Real Estate, Other
Category	03/31/13		12/31/12		03/31/13		12/31/12
Pass	$	3,000	$	3,051	$	11,874	$	11,582
6		0		0		146		147
7		71		71		1,198		1,278
8		0		0		0		0
Total	$	3,071	$	3,122	$	13,218	$	13,007

Consumer Credit Exposure (Dollar amounts in thousands)

Credit risk by credit worthiness category

	Consumer - Equity				Consumer – Auto				Consumer - Other
Category	03/31/13		12/31/12		03/31/13		12/31/12		03/31/13		12/31/12
Pass	$	18,344	$	19,091	$	5,745	$	6,225	$	11,770	$	11,961
6		0		32		0		0		4		5
7		290		275		11		14		62		66
8		0		0		0		0		0		0
Total	$	18,634	$	19,398	$	5,756	$	6,239	$	11,836	$	12,032