Loans (Tables)

12 Months Ended

Dec. 31, 2012

Loans are comprised of the following:

	December 31,		December 31,
(In thousands)	2012		2011
Commercial and business loans	$	69,780	$	96,076
Government program loans		2,337		2,984
Total commercial and industrial	$	72,117	$	99,060
Real estate – mortgage:
Commercial real estate		133,599		140,590
Residential mortgages		55,016		39,682
Home Improvement and Home Equity loans		1,319		1,859
Total real estate mortgage		189,934		182,131
RE construction and development		90,941		70,877
Agricultural		36,169		45,483
Installment		10,884		11,115
Lease financing		12		49
Total Loans	$	400,057	$	408,715

Loans to Affiliates

Loans to directors, officers, principal shareholders and their affiliates are summarized below:

	December 31,
(In thousands)	2012			2011
Aggregate amount outstanding, beginning of year		3,244			10,580
New loans or advances during year		2,043			1,959
Repayments during year		(1,957	)		(9,295	)
Aggregate amount outstanding, end of year	$	3,330		$	3,244
Loan commitments	$	2,916		$	3,001

Delinquent Loans

The Company monitors delinquency and potential problem loans on an ongoing basis through weekly reports to the Loan Committee and monthly reports to the Board of Directors. There were no loans over 90 days past due and still accruing at December 31, 2012. Loans over 90 days past due and still accruing at December 31, 2011 totaled $74,000. The following is a summary of delinquent loans at December 31, 2012:

					Loans								Accruing
	Loans		Loans		90 or More								Loans 90 or
	30-60 Days		61-89 Days		Days		Total Past		Current		Total		More Days
December 31, 2012 (000's)	Past Due		Past Due		Past Due		Due Loans		Loans		Loans		Past Due
Commercial and Business Loans		65		0		256		321		69,459	$	69,780		0
Government Program Loans		88		0		0		88		2,249		2,337		0
Total Commercial and Industrial		153		0		256		409		71,708		72,117		0

Commercial Real Estate Loans		3,152		2,130		5,328		10,610		122,989		133,599		0
Residential Mortgages		333		322		437		1,092		53,924		55,016		0
Home Improvement and Home Equity Loans		119		140		0		259		1,060		1,319		0
Total Real Estate Mortgage		3,604		2,592		5,765		11,961		177,973		189,934		0

Total RE Construction and Development Loans		0		0		0		0		90,941		90,941		0

Total Agricultural Loans		0		136		0		136		36,033		36,169		0

Consumer Loans		305		34		0		339		10,300		10,639		0
Overdraft protection Lines		0		0		0		0		90		90		0
Overdrafts		0		0		0		0		155		155		0
Total Installment		305		34		0		339		10,545		10,884		0

Lease Financing		0		0		0		0		12		12		0

Total Loans		4,062		2,762		6,021		12,845		387,212	$	400,057		0

The following is a summary of delinquent loans at December 31, 2011:

					Loans								Accruing
	Loans		Loans		90 or More								Loans 90 or
	30-60 Days		61-89 Days		Days		Total Past		Current		Total		More Days
December 31, 2011 (000's)	Past Due		Past Due		Past Due		Due Loans		Loans		Loans		Past Due
Commercial and Business Loans		154		191		3,552		3,897		92,179	$	96,076		0
Government Program Loans		0		0		433		433		2,551		2,984		74
Total Commercial and Industrial		154		191		3,985		4,330		94,730		99,060		74

Commercial Real Estate Loans		1,248		2,514		0		3,762		136,828		140,590		0
Residential Mortgages		328		0		0		328		39,354		39,682		0
Home Improvement and Home Equity Loans		62		132		0		194		1,665		1,859		0
Total Real Estate Mortgage		1,638		2,646		0		4,284		177,847		182,131		0

Total RE Construction and Development Loans		0		0		6,150		6,150		64,727		70,877		0

Total Agricultural Loans		0		0		0		0		45,483		45,483		0

Consumer Loans		297		0		0		297		10,609		10,906		0
Overdraft protection Lines		0		0		0		0		85		85		0
Overdrafts		0		0		0		0		124		124		0
Total Installment		297		0		0		297		10,818		11,115		0

Lease Financing		0		0		0		0		49		49		0

Total Loans		2,089		2,837		10,135		15,061		393,654	$	408,715		74

Nonaccrual Loan Balances

The following is a summary of nonaccrual loan balances at December 31, 2012 and 2011 (in thousands).

	December 31,		December 31,
	2012		2011
Commercial and Business Loans	$	1,093	$	4,722
Government Program Loans		88		358
Total Commercial and Industrial		1,181		5,080

Commercial Real Estate Loans		8,415		2,688
Residential Mortgages		1,834		1,258
Home Improvement and Home Equity Loans		10		15
Total Real Estate Mortgage		10,259		3,961

Total RE Construction and Development Loans		1,730		9,014

Total Agricultural Loans		136		0

Consumer Loans		119		43
Overdraft protection Lines		0		0
Overdrafts		0		0
Total Installment		119		43

Lease Financing		0		0
Total Loans	$	13,425	$	18,098

Impaired Loans

Loans other than certain homogenous loan portfolios are reviewed on a quarterly basis for impairment. Impaired loans are written down to estimated realizable values by the establishment of specific reserves when required. The following is a summary of impaired loans at December 31, 2012.

	Unpaid		Recorded		Recorded
	Contractual		Investment		Investment		Total				Average
	Principal		With No		With		Recorded		Related		Recorded
December 31, 2012 (000's)	Balance		Allowance		Allowance		Investment		Allowance		Investment
Commercial and Business Loans	$	1,488	$	767	$	576	$	1,343	$	37	$	5,468
Government Program Loans		109		88		0		88		0		147
Total Commercial and Industrial		1,597		855		576		1,431		37		5,615

Commercial Real Estate Loans		11,393		6,818		4,237		11,055		436		8,498
Residential Mortgages		7,461		3,726		3,666		7,392		185		4,416
Home Improvement and Home Equity Loans		10		10		0		10		0		21
Total Real Estate Mortgage		18,864		10,554		7,903		18,457		621		12,935

Total RE Construction and Development Loans		1,730		1,730		0		1,730		0		7,298

Total Agricultural Loans		504		192		0		192		0		991

Consumer Loans		139		121		0		121		0		200
Overdraft protection Lines		0		0		0		0		0		0
Overdrafts		0		0		0		0		0		0
Total Installment		139		121		0		121		0		200

Leases Financing		0		0		0		0		0	$	0

Total Impaired Loans	$	22,834	$	13,452	$	8,479	$	21,931	$	658	$	27,039

The following is a summary of impaired loans at December 31, 2011.

	Unpaid		Recorded		Recorded
	Contractual		Investment		Investment		Total				Average
	Principal		With No		With		Recorded		Related		Recorded
December 31, 2011 (000's)	Balance		Allowance		Allowance		Investment		Allowance		Investment
Commercial and Business Loans	$	6,521	$	4,002	$	2,425	$	6,427	$	112	$	11,102
Government Program Loans		704		212		0		212		0	$	301
Total Commercial and Industrial		7,225		4,214		2,425		6,639		112		11,403

Commercial Real Estate Loans		6,838		2,951		3,736		6,687		489	$	6,935
Residential Mortgages		5,136		1,708		3,395		5,103		200	$	3,934
Home Improvement and Home Equity Loans		36		22		15		37		1	$	96
Total Real Estate Mortgage		12,010		4,681		7,146		11,827		690		10,965

Total RE Construction and Development Loans		11,535		9,014		2,418		11,432		71	$	17,184

Total Agricultural Loans		2,445		61		1,792		1,853		381	$	2,139

Consumer Loans		88		130		0		130		0	$	184
Overdraft protection Lines		0		0		0		0		0	$	0
Overdrafts		0		0		0		0		0	$	0
Total Installment		88		130		0		130		0		184

Lease Financing		0		0		0		0		0	$	55

Total Impaired Loans	$	33,355	$	18,100	$	13,781	$	31,881	$	1,254	$	41,930

Troubled Debt Restructuring Activity

The following tables illustrate TDR activity that occurred during the periods indicated (in thousands):

	Year Ended December 31, 2012
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings

Commercial and Business Loans		3	$	320	$	303
Government Program Loans		1		103		88
Commercial Real Estate Loans		4		2,535		2,506
Residential Mortgages		2		324		323
Home Improvement and Home Equity Loans		1		0		0
RE Construction and Development Loans		14		1,130		1,130
Agricultural Loans		2		192		191
Consumer Loans		1		20		19
Overdraft protection Lines		0		0		0
Lease Financing		0		0		0
Total Loans		28	$	4,624	$	4,560

Year Ended December 31, 2012
	Number of Contracts		Recorded Investment
Troubled Debt Restructurings that Defaulted

Commercial and Business Loans		0	$	0
Government Program Loans		0		0
Commercial Real Estate Loans		0		0
Single Family Residential Loans		0		0
Home Improvement and Home Equity Loans		0		0
RE Construction and Development Loans		0		0
Agricultural Loans		0		0
Consumer Loans		0		0
Overdraft protection Lines		0		0
Lease Financing		0		0
Total Loans		0	$	0

	Year Ended December 31, 2011
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings

Commercial and Business Loans		5	$	2,240	$	2,041
Government Program Loans		0		0		0
Commercial Real Estate Loans		1		1,406		1,249
Residential Mortgages		3		2,989		2,104
Home Improvement and Home Equity Loans		0		0		0
RE Construction and Development Loans		0		0		0
Agricultural Loans		0		0		0
Consumer Loans		2		130		15
Overdraft protection Lines		0		0		0
Lease Financing		0		0		0
Total Loans		11	$	6,765	$	5,409

Year Ended December 31, 2011
	Number of Contracts		Recorded Investment
Troubled Debt Restructurings that Defaulted

Commercial and Business Loans		2	$	132
Government Program Loans		0		0
Commercial Real Estate Loans		0		0
Single Family Residential Loans		1		327
Home Improvement and Home Equity Loans		0		0
RE Construction and Development Loans		0		0
Agricultural Loans		0		0
Consumer Loans		1		85
Overdraft protection Lines		0		0
Lease Financing		0		0
Total Loans		4	$	544

Credit Risk Rating for Commercial, Construction and Non-consumer Related Loans

The following tables summarize the credit risk ratings for commercial, construction, and other non-consumer related loans for December 31, 2012 and 2011. The Company did not carry any loans graded as loss at December 31, 2012 or 2011.

	Commercial
December 31, 2012	and Lease		Commercial
(000's)	Financing		RE		Construction		Agricultural		Total
Grades 1and 2		825		0		119		60		1,004
Grade 3		2,071		5,947		856		0		8,874
Grades 4 and 5 – pass		66,110		116,606		75,072		35,973		293,761
Grade 6 – special mention		1,867		0		141		0		2,008
Grade 7 – substandard		1,256		11,046		14,753		136		27,191
Grade 8 – doubtful
Total		72,129		133,599		90,941		36,169		332,838

	Commercial
December 31, 2011	and Lease		Commercial
(000's)	Financing		RE		Construction		Agricultural		Total
Grades 1and 2		725		0		0		40		765
Grade 3		157		7,026		897		0		8,080
Grades 4 and 5 – pass		108,362		101,850		49,242		43,662		303,116
Grade 6 – special mention		4,610		6,124		0		0		10,734
Grade 7 – substandard		5,320		5,356		20,907		1,781		33,364
Grade 8 – doubtful
Total		119,174		120,356		71,046		45,483		356,059

Credit Risk Ratings for Consumer Related Loans and Other Homogenous Loans

The Company follows consistent underwriting standards outlined in its loan policy for consumer and other homogenous loans, but does not specifically assign as risk rating when these loans are originated. Consumer loans are monitored for credit risk and are considered "pass" loans until some issue or event requires that the credit be downgraded to special mention or worse. The following tables summarize the credit risk ratings for consumer related loans and other homogenous loans for December 31, 2012 and 2011.

	December 31, 2012								December 31, 2011
	Single family		Home						Single family		Home
(000's)	Residential		Improvement		Installment		Total		Residential		Improvement		Installment		Total
Not graded		30,727		1,309		9,221		41,257		19,173		1,801		9,332		30,306
Pass		20,572		0		1,422		21,994		18,471		22		1,236		19,729
Special Mention		909		0		49		958		446		0		423		869
Substandard		2,808		10		192		3,010		1,592		36		124		1,752
Total		55,016		1,319		10,884		67,219		39,682		1,859		11,115		52,656

Allowance for Credit Loses by Loan Category

The following summarizes the activity in the allowance for credit losses by loan category for the years ended December 31, 2012 and 2011.

	Commercial			Real			RE
	and			Estate			Construction						Installment			Lease
2012 (in 000's)	Industrial			Mortgage			Development			Agricultural			& Other			Financing			Unallocated		Total
Beginning balance	$	4,782		$	2,070		$	5,634		$	803		$	117		$	1		$	241	$	13,648
Provision for credit losses		(2,730	)		(235	)		(3,431	)		1,860			384			(11	)		5,182		1,019

Charge-offs		(1,080	)		(620	)		(10	)		(2,317	)		(251	)		-			-		(4,278	)
Recoveries		642			77			621			6			38			11			-		1,395
Net charge-offs		(438	)		(543	)		611			(2,311	)		(213	)		11			-		(2,883	)

Ending balance	$	1,614		$	1,292		$	2,814		$	352		$	288		$	1		$	5,423	$	11,784
Period-end amount allocated to:
Loans individually evaluated
for impairment		37			621			0			0			0			0			0		658
Loans collectively evaluated
for impairment		1,577			671			2,814			352			288			1			5,423		11,126
Ending balance	$	1,614		$	1,292		$	2,814		$	352		$	288		$	1		$	5,423	$	11,784

	Commercial			Real			RE
	and			Estate			Construction						Installment			Lease
2011 (in 000's)	Industrial			Mortgage			Development			Agricultural			& Other			Financing			Unallocated		Total
Beginning balance		7,602			1890			6,081			867			51			3			26		16,520
Provision for credit losses		5,870			498			6,300			(64	)		675			108			215		13,602

Charge-offs		(9,340	)		(453	)		(6,771	)		-			(620	)		(110	)				(17,294	)
Recoveries		650			135			24			-			11			-					820
Net charge-offs		(8,690	)		(318	)		(6,747	)		-			(609	)		(110	)		-		(16,474	)

Ending balance	$	4,782		$	2,070		$	5,634		$	803		$	117		$	1		$	241	$	13,648
Period-end amount allocated to:
Loans individually evaluated
for impairment		112			690			71			381			0			0			0		1,254
Loans collectively evaluated
for impairment		4,670			1,380			5,563			422			117			1			241		12,394
Ending balance	$	4,782		$	2,070		$	5,634		$	803		$	117		$	1		$	241	$	13,648

Summarized Loan Balances

The following summarizes information with respect to the loan balances at December 31, 2012 and 2011.

	December 31, 2012						December 31, 2011
	Loans		Loans				Loans		Loans
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Total		Evaluated		Evaluated		Total
(000's)	for Impairment		for Impairment		Loans		for Impairment		for Impairment		Loans
Commercial and Business Loans	$	1,343	$	68,437	$	69,780	$	6,427	$	89,649	$	96,076
Government Program Loans		88		2,249		2,337		212		2,772		2,984
Total Commercial and Industrial		1,431		70,686		72,117		6,639		92,421		99,060

Commercial Real Estate Loans		11,055		122,544		133,599		6,687		133,903		140,590
Residential Mortgage Loans		7,392		47,624		55,016		5,103		34,579		39,682
Home Improvement and Home Equity Loans		10		1,309		1,319		37		1,822		1,859
Total Real Estate Mortgage		18,457		171,477		189,934		11,827		170,304		182,131

Total RE Construction and Development Loans		1,730		89,211		90,941		11,432		59,445		70,877

Total Agricultural Loans		192		35,977		36,169		1,853		43,630		45,483

Total Installment Loans		121		10,763		10,884		130		10,985		11,115

Commercial Leases Financing		-		12		12		-		49		49

Total Loans	$	21,931	$	378,126	$	400,057	$	31,881	$	376,834	$	408,715