Loans (Tables)

9 Months Ended

Sep. 30, 2013

Summary of loan portfolio and allowance for loan losses

The following table summarizes the primary segments of the loan portfolio and how those segments are analyzed within the allowance for loan losses as of September 30, 2013 and December 31, 2012 (in thousands):

September 30, 2013	Total Loans	Individually evaluated for impairment	Collectively evaluated for impairment
Real estate loans:
Residential	$ 183,370	$ 482	$ 182,888
Commercial and agricultural	196,446	8,594	187,852
Construction	18,272	-	18,272
Consumer	9,979	15	9,964
Other commercial and agricultural loans	54,160	1,795	52,365
State and political subdivision loans	60,105	-	60,105
Total	522,332	$ 10,886	$ 511,446
Allowance for loan losses	7,070
Net loans	$ 515,262

December 31, 2012	Total Loans	Individually evaluated for impairment	Collectively evaluated for impairment
Real estate loans:
Residential	$ 178,080	$ 424	$ 177,656
Commercial and agricultural	194,725	9,093	185,632
Construction	12,011	-	12,011
Consumer	10,559	-	10,559
Other commercial and agricultural loans	47,880	901	46,979
State and political subdivision loans	59,208	-	59,208
Total	502,463	$ 10,418	$ 492,045
Allowance for loan losses	6,784
Net loans	$ 495,679

Impaired financing receivables with associated allowance amount

The following table includes the recorded investment and unpaid principal balances for impaired financing receivables by class, with the associated allowance amount, if applicable (in thousands):

		Recorded	Recorded
	Unpaid	Investment	Investment	Total
	Principal	With No	With	Recorded	Related
September 30, 2013	Balance	Allowance	Allowance	Investment	Allowance
Real estate loans:
Mortgages	$ 375	$ 141	$ 206	$ 347	$ 24
Home Equity	135	-	135	135	13
Commercial	10,052	5,714	2,880	8,594	560
Agricultural	-	-	-	-	-
Construction	-	-	-	-	-
Consumer	15	15	-	15	-
Other commercial loans	1,851	1,438	357	1,795	1
Other agricultural loans	-	-	-	-	-
State and political
subdivision loans	-	-	-	-	-
Total	$ 12,428	$ 7,308	$ 3,578	$ 10,886	$ 598

December 31, 2012
Real estate loans:
Mortgages	$ 309	$ 150	$ 136	$ 286	$ 8
Home Equity	138	-	138	138	14
Commercial	10,669	6,476	2,617	9,093	559
Agricultural	-	-	-	-	-
Construction	-	-	-	-	-
Consumer	-	-	-	-	-
Other commercial loans	950	592	309	901	1
Other agricultural loans	-	-	-	-	-
State and political
subdivision loans	-	-	-	-	-
Total	$ 12,066	$ 7,218	$ 3,200	$ 10,418	$ 582

The following table includes the average balance of impaired financing receivables by class and the income recognized on impaired loans for the three and nine month periods ended September 30, 2013 and 2012 (in thousands):

	For the Nine Months ended
	September 30, 2013			September 30, 2012
			Interest			Interest
	Average	Interest	Income	Average	Interest	Income
	Recorded	Income	Recognized	Recorded	Income	Recognized
	Investment	Recognized	Cash Basis	Investment	Recognized	Cash Basis
Real estate loans:
Mortgages	$ 336	$ 6	$ -	$ 139	$ 2	$ -
Home Equity	136	3	-	100	3	1
Commercial	8,521	426	361	7,891	74	45
Agricultural	-	-	-	-	-	-
Construction	-	-	-	-	-	-
Consumer	2	-	-	-	-	-
Other commercial loans	1,740	58	-	439	-	-
Other agricultural loans	-	-	-	-	-	-
State and political
subdivision loans	-	-	-	-	-	-
Total	$ 10,735	$ 493	$ 361	$ 8,569	$ 79	$ 46

	For the Three Months Ended
	September 30, 2013			September 30, 2012
			Interest			Interest
	Average	Interest	Income	Average	Interest	Income
	Recorded	Income	Recognized	Recorded	Income	Recognized
	Investment	Recognized	Cash Basis	Investment	Recognized	Cash Basis
Real estate loans:
Mortgages	$ 349	$ 2	$ -	$ 253	$ 1	$ -
Home Equity	135	1	-	113	1	-
Commercial	8,372	342	326	7,398	35	22
Agricultural	-	-	-	-	-	-
Construction	-	-	-	-	-	-
Consumer	5	-	-	-	-	-
Other commercial loans	1,647	17	-	382	-	-
Other agricultural loans	-	-	-	-	-	-
State and political
subdivision loans	-	-	-	-	-	-
Total	$ 10,508	$ 362	$ 326	$ 8,146	$ 37	$ 22

Summary of financing receivable credit exposures by internally assigned grades

The following tables represent credit exposures by internally assigned grades as of September 30, 2013 and December 31, 2012 (in thousands):

September 30, 2013	Pass	Special Mention	Substandard	Doubtful	Loss	Ending Balance
Real estate loans:
Commercial	$ 150,711	$ 3,045	$ 21,566	$ 211	$ -	$ 175,533
Agricultural	15,054	3,845	2,014	-	-	20,913
Construction	18,272	-	-	-	-	18,272
Other commercial loans	40,948	1,526	2,398	8	-	44,880
Other agricultural loans	7,142	865	1,273	-	-	9,280
State and political
subdivision loans	60,105	-	-	-	-	60,105
Total	$ 292,232	$ 9,281	$ 27,251	$ 219	$ -	$ 328,983
December 31, 2012
Real estate loans:
Commercial	$ 149,892	$ 7,616	$ 19,127	$ 75	$ -	$ 176,710
Agricultural	13,690	2,386	1,939	-	-	18,015
Construction	12,011	-	-	-	-	12,011
Other commercial loans	39,239	826	1,555	-	-	41,620
Other agricultural loans	4,833	589	838	-	-	6,260
State and political
subdivision loans	58,120	-	1,088	-	-	59,208
Total	$ 277,785	$ 11,417	$ 24,547	$ 75	$ -	$ 313,824

For residential real estate mortgages, home equity and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail below and all loans past due 90 or more days. The following table presents the recorded investment in those loan classes based on payment activity as of September 30, 2013 and December 31, 2012 (in thousands):

September 30, 2013	Performing	Non-performing	Total
Real estate loans:
Mortgages	$ 114,291	$ 718	$ 115,009
Home Equity	68,089	272	68,361
Consumer	9,964	15	9,979
Total	$ 192,344	$ 1,005	$ 193,349

December 31, 2012
Real estate loans:
Mortgages	$ 105,822	$ 726	$ 106,548
Home Equity	71,263	269	71,532
Consumer	10,555	4	10,559
Total	$ 187,640	$ 999	$ 188,639

Age analysis of past due financing receivables

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table includes an aging analysis of the recorded investment of past due financing receivables as of September 30, 2013 and December 31, 2012 (in thousands):

		30-59 Days	60-89 Days	90 Days	Total Past		Total Financing	90 Days and
September 30, 2013		Past Due	Past Due	Or Greater	Due	Current	Receivables	Accruing
Real estate loans:
Mortgages		$ 935	$ 140	$ 600	$ 1,675	$ 113,334	$ 115,009	$ 195
Home Equity		539	137	230	906	67,455	68,361	94
Commercial		1,186	283	3,019	4,488	171,045	175,533	299
Agricultural		125	-	-	125	20,788	20,913	-
Construction		-	-	-	-	18,272	18,272	-
Consumer		46	16	-	62	9,917	9,979	-
Other commercial loans		17	65	351	433	44,447	44,880	-
Other agricultural loans		-	-	-	-	9,280	9,280	-
State and political
subdivision loans		-	-	-	-	60,105	60,105	-
	Total	$ 2,848	$ 641	$ 4,200	$ 7,689	$ 514,643	$ 522,332	$ 588
Loans considered non-accrual		$ 127	$ 425	$ 3,612	$ 4,164	$ 4,533	$ 8,697
Loans still accruing		2,721	216	588	3,525	510,110	513,635
	Total	$ 2,848	$ 641	$ 4,200	$ 7,689	$ 514,643	$ 522,332

December 31, 2012
Real estate loans:
Mortgages		$ 636	$ 294	$ 493	$ 1,423	$ 105,125	$ 106,548	$ 244
Home Equity		267	17	222	506	71,026	71,532	88
Commercial		602	-	2,149	2,751	173,959	176,710	152
Agricultural		54	-	-	54	17,961	18,015	-
Construction		-	-	-	-	12,011	12,011	-
Consumer		45	43	4	92	10,467	10,559	4
Other commercial loans		962	-	317	1,279	40,341	41,620	18
Other agricultural loans		-	-	-	-	6,260	6,260	-
State and political
subdivision loans		-	-	-	-	59,208	59,208	-
	Total	$ 2,566	$ 354	$ 3,185	$ 6,105	$ 496,358	$ 502,463	$ 506
Loans considered non-accrual		$ 73	$ 69	$ 2,679	$ 2,821	$ 5,246	$ 8,067
Loans still accruing		2,493	285	506	3,284	491,112	494,396
	Total	$ 2,566	$ 354	$ 3,185	$ 6,105	$ 496,358	$ 502,463

Summary of financing receivables on nonaccrual status

The following table reflects the financing receivables on non-accrual status as of September 30, 2013 and December 31, 2012, respectively. The balances are presented by class of financing receivable (in thousands):

	September 30, 2013	December 31, 2012
Real estate loans:
Mortgages	$ 523	$ 482
Home Equity	178	181
Commercial	7,521	7,042
Agricultural	-	-
Construction	-	-
Consumer	15	-
Other commercial loans	460	362
Other agricultural loans	-	-
State and political subdivision	-	-
	$ 8,697	$ 8,067

Summary of troubled debt restructurings on financing receivables

There were no loan modifications that were considered TDRs during the three months ended September 30, 2013. Loan modifications that are considered TDRs completed during the nine months ended September 30, 2013 and 2012 and the three months ended September 30, 2012, were as follows (dollars in thousands):

	For the Nine Months Ended September 30, 2013
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	Interest Modification	Term Modification	Interest Modification	Term Modification	Interest Modification	Term Modification
Real estate loans:
Mortgages	1	-	$ 72	$ -	$ 72	$ -
Commercial	-	2	-	1,365	-	1,365
Other commercial loans	-	2	-	1,530	-	1,530
Total	1	4	$ 72	$ 2,895	$ 72	$ 2,895

	For the Three Months Ended September 30, 2012
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	Interest Modification	Term Modification	Interest Modification	Term Modification	Interest Modification	Term Modification
Real estate loans:
Commercial	-	1	$ -	$ 62	$ -	$ 62
Total	-	1	$ -	$ 62	$ -	$ 62

	For the Nine Months Ended September 30, 2012
	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	Interest Modification	Term Modification	Interest Modification	Term Modification	Interest Modification	Term Modification
Real estate loans:
Residential mortgage	1	1	$ 48	$ 71	$ 48	$ 71
Commercial	-	3	-	160	-	160
Total	1	4	$ 48	$ 231	$ 48	$ 231

Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a non-accrual loan. Recidivism occurs at a notably higher rate than do defaults on new origination loans, so modified loans present a higher risk of loss than do new origination loans. The following table presents the recorded investment in loans that were modified as TDRs during each 12-month period prior to the current reporting periods, which begin January 1, 2013 and 2012 (nine month periods) and July 1, 2013 and 2012 (3 month periods), respectively, and that subsequently defaulted during these reporting periods (dollars in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2013		September 30, 2012		September 30, 2013		September 30, 2012
	Number of contracts	Recorded investment	Number of contracts	Recorded investment	Number of contracts	Recorded investment	Number of contracts	Recorded investment
Real estate loans:
Commercial	-	$ -	-	$ -	-	$ -	1	$ 50
Total recidivism	-	$ -	-	$ -	-	$ -	1	$ 50

Allowance for loan losses by impairment method

The following table segregates the allowance for loan losses (ALLL) into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of September 30, 2013 and December 31, 2012, respectively (in thousands):

	September 30, 2013			December 31, 2012
	Individually evaluated for impairment	Collectively evaluated for impairment	Total	Individually evaluated for impairment	Collectively evaluated for impairment	Total
Real estate loans:
Residential	$ 37	$ 919	$ 956	$ 22	$ 853	$ 875
Commercial and agricultural	560	3,852	4,412	559	3,878	4,437
Construction	-	112	112	-	38	38
Consumer	-	114	114	-	119	119
Other commercial and agricultural loans	1	963	964	1	727	728
State and political subdivision loans	-	313	313	-	271	271
Unallocated	-	199	199	-	316	316
Total	$ 598	$ 6,472	$ 7,070	$ 582	$ 6,202	$ 6,784

Roll forward of allowance for loan losses by portfolio segment

The following tables roll forward the balance of the ALLL by portfolio segment for the three and nine month periods ended September 30, 2013 and 2012, respectively (in thousands):

	Balance at June 30, 2013	Charge-offs	Recoveries	Provision	Balance at September 30, 2013
Real estate loans:
Residential	$ 934	$ (2)	$ 1	$ 23	$ 956
Commercial and agricultural	4,240	-	-	172	4,412
Construction	91	-	-	21	112
Consumer	114	(12)	5	7	114
Other commercial and agricultural loans	957	(1)	-	8	964
State and political subdivision loans	310	-	-	3	313
Unallocated	343	-	-	(144)	199
Total	$ 6,989	$ (15)	$ 6	$ 90	$ 7,070

	Balance at December 31, 2012	Charge-offs	Recoveries	Provision	Balance at September 30, 2013
Real estate loans:
Residential	$ 875	$ (15)	$ 3	$ 93	$ 956
Commercial and agricultural	4,437	-	-	(25)	4,412
Construction	38	-	-	74	112
Consumer	119	(42)	26	11	114
Other commercial and agricultural loans	728	(1)	-	237	964
State and political subdivision loans	271	-	-	42	313
Unallocated	316	-	-	(117)	199
Total	$ 6,784	$ (58)	$ 29	$ 315	$ 7,070

	Balance at June 30, 2012	Charge-offs	Recoveries	Provision	Balance at September 30, 2012
Real estate loans:
Residential	$ 786	$ -	$ -	$ 79	$ 865
Commercial and agricultural	4,405	-	1	(175)	4,231
Construction	19	-	-	7	26
Consumer	108	(12)	9	(1)	104
Other commercial and agricultural loans	685	(20)	1	-	666
State and political subdivision loans	246	-	-	28	274
Unallocated	401	-	-	167	568
Total	$ 6,650	$ (32)	$ 11	$ 105	$ 6,734

	Balance at December 31, 2011	Charge-offs	Recoveries	Provision	Balance at September 30, 2012
Real estate loans:
Residential	$ 805	$ (49)	$ -	$ 109	$ 865
Commercial and agricultural	4,132	(2)	7	94	4,231
Construction	15	-	-	11	26
Consumer	111	(36)	25	4	104
Other commercial and agricultural loans	674	(20)	7	5	666
State and political subdivision loans	235	-	-	39	274
Unallocated	515	-	-	53	568
Total	$ 6,487	$ (107)	$ 39	$ 315	$ 6,734