LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES (Tables)

12 Months Ended

Dec. 31, 2013

Summary of loan portfolio and allowance for loan losses

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

2013	Total Loans	Individually evaluated for impairment	Collectively evaluated for impairment
Real estate loans:
Residential	$ 187,101	$ 342	$ 186,759
Commercial and agricultural	215,088	8,310	206,778
Construction	8,937	-	8,937
Consumer	9,563	15	9,548
Other commercial and agricultural loans	54,029	1,733	52,296
State and political subdivision loans	65,894	-	65,894
Total	540,612	$ 10,400	$ 530,212
Allowance for loan losses	7,098
Net loans	$ 533,514
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 loans by class, with the associated allowance amount as of December 31, 2013 and 2012, if applicable (in thousands):

			Recorded		Recorded
	Unpaid		Investment		Investment		Total
	Principal		With No		With		Recorded		Related
	Balance		Allowance		Allowance		Investment		Allowance
2013
Real estate loans:
Mortgages	$	232	$	138	$	70	$	208	$	14
Home Equity		134		65		69		134		13
Commercial		9,901		6,335		1,975		8,310		305
Agricultural		-		-		-		-		-
Construction		-		-		-		-		-
Consumer		15		15		-		15		-
Other commercial loans		1,794		1,679		54		1,733		1
Other agricultural loans		-		-		-		-		-
State and political subdivision loans		-		-		-		-		-
Total	$	12,076	$	8,232	$	2,168	$	10,400	$	333

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 investment in impaired loans and the income recognized on impaired loans for 2013, 2012 and 2011 (in thousands):

					Interest
	Average		Interest		Income
	Recorded		Income		Recognized
2013	Investment		Recognized		Cash Basis
Real estate loans:
Mortgages	$	327	$	7	$	-
Home Equity		136		4		-
Commercial		8,499		457		377
Agricultural		-		-		-
Construction		-		-		-
Consumer		5		-		-
Other commercial loans		1,761		79		-
Other agricultural loans		-		-		-
State and political subdivision loans		-		-		-
Total	$	10,728	$	547	$	377

2012
Real estate loans:
Mortgages	$	170	$	2	$	2
Home Equity		112		4		4
Commercial		7,882		117		117
Agricultural		-		-		-
Construction		-		-		-
Consumer		-		-		-
Other commercial loans		461		-		-
Other agricultural loans		-		-		-
State and political subdivision loans		-		-		-
Total	$	8,625	$	123	$	123

2011
Real estate loans:
Mortgages	$	-	$	-	$	-
Home Equity		39		1		1
Commercial		8,584		65		65
Agricultural		370		37		37
Construction		-		-		-
Consumer		-		-		-
Other commercial loans		501		-		-
Other agricultural loans		159		20		20
State and political subdivision loans		-		-		-
Total	$	9,653	$	123	$	123

Summary of financing receivable credit exposures by internally assigned grades

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

2013	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	166,956	$	4,645	$	21,284	$	202	$	-	$	193,087
Agricultural		15,923		1,910		4,168		-		-		22,001
Construction		8,937		-		-		-		-		8,937
Other commercial loans		40,798		1,747		1,938		5		-		44,488
Other agricultural loans		7,431		153		1,957		-		-		9,541
State and political subdivision loans		65,894		-		-		-		-		65,894
Total	$	305,939	$	8,455	$	29,347	$	207	$	-	$	343,948

2012	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
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

The following table presents the recorded investment in those loan classes based on payment activity as of December 31, 2013 and 2012 (in thousands):

2013	Performing		Non-performing		Total
Real estate loans:
Mortgages	$	119,075	$	809	$	119,884
Home Equity		66,989		228		67,217
Consumer		9,547		16		9,563
Total	$	195,611	$	1,053	$	196,664

2012	Performing		Non-performing		Total
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 loans as of December 31, 2013 and 2012, (in thousands):

	30-59 Days		60-89 Days		90 Days		Total Past				Total Financing		90 Days and
2013	Past Due		Past Due		Or Greater		Due		Current		Receivables		Accruing
Real estate loans:
Mortgages	$	362	$	40	$	739	$	1,141	$	118,743	$	119,884	$	301
Home Equity		632		2		229		863		66,354		67,217		51
Commercial		88		319		3,091		3,498		189,589		193,087		344
Agricultural		-		-		-		-		22,001		22,001		-
Construction		-		-		-		-		8,937		8,937		-
Consumer		96		36		16		148		9,415		9,563		1
Other commercial loans		29		28		49		106		44,382		44,488		-
Other agricultural loans		-		-		-		-		9,541		9,541		-
State and political subdivision loans		-		-		-		-		65,894		65,894		-
Total	$	1,207	$	425	$	4,124	$	5,756	$	534,856	$	540,612	$	697

Loans considered non-accrual	$	98	$	164	$	3,427	$	3,689	$	4,408	$	8,097
Loans still accruing		1,109		261		697		2,067		530,448		532,515
Total	$	1,207	$	425	$	4,124	$	5,756	$	534,856	$	540,612

	30-59 Days		60-89 Days		90 Days		Total Past				Total Financing		90 Days and
2012	Past Due		Past Due		Or Greater		Due		Current		Receivables		Accruing
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 loans on nonaccrual status as of December 31, 2013 and 2012, respectively. The balances are presented by class of loan (in thousands):

	2013		2012
Real estate loans:
Mortgages	$	508	$	482
Home Equity		177		181
Commercial		7,247		7,042
Agricultural		-		-
Construction		-		-
Consumer		15		-
Other commercial loans		150		362
Other agricultural loans		-		-
State and political subdivision		-		-

	$	8,097	$	8,067

Summary of troubled debt restructurings on financing receivables

Loan modifications that are considered TDR’s completed during the years ended December 31, 2013 and 2012 were as follows (dollars in thousands):

	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
2013
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

2012
Real estate loans:
Mortgages		1		1	$	48	$	71	$	48	$	71
Commercial		-		3		-		160		-		160
Other commercial loans		-		1		-		25		-		25
Total		1		5	$	48	$	256	$	48	$	256

2011
Real estate loans:
Residential		2		-	$	76	$	-	$	76	$	-
Commercial		5		1		5,912		47		5,912		47
Other commercial loans		1		-		15		-		15		-
Total		8		1	$	6,003	$	47	$	6,003	$	47

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, respectively, and that subsequently defaulted during these reporting periods (dollars in thousands):

	2013				2012				2011
	Number of contracts		Recorded investment		Number of contracts		Recorded investment		Number of contracts		Recorded investment
Real estate loans:
Commercial		1	$	55		1	$	50		3	$	150
Other commercial loans		1		6		-		-		-		-
Total recidivism		2	$	61		1	$	50		3	$	150

Roll forward of allowance for loan losses by portfolio segment

The following tables roll forward the balance of the allowance for loan and lease losses for the years ended December 31, 2013, 2012 and 2011 and is segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of December 31, 2013, 2012 and 2011 (in thousands):

	Balance at December 31, 2012		Charge-offs			Recoveries		Provision			Balance at December 31, 2013		Individually evaluated for impairment		Collectively evaluated for impairment
Real estate loans:
Residential	$	875	$	(17	)	$	5	$	83		$	946	$	27	$	919
Commercial and agricultural		4,437		(62	)		5		178			4,558		305		4,253
Construction		38		-			-		12			50		-		50
Consumer		119		(54	)		33		7			105		-		105
Other commercial and agricultural loans		728		(1	)		-		215			942		1		941
State and political subdivision loans		271		-			-		59			330		-		330
Unallocated		316		-			-		(149	)		167		-		167
Total	$	6,784	$	(134	)	$	43	$	405		$	7,098	$	333	$	6,765

	Balance at December 31, 2011		Charge-offs			Recoveries		Provision			Balance at December 31, 2012		Individually evaluated for impairment		Collectively evaluated for impairment
Real estate loans:
Residential	$	805	$	(95	)	$	-	$	165		$	875	$	22	$	853
Commercial and agricultural		4,132		(2	)		9		298			4,437		559		3,878
Construction		15		-			-		23			38		-		38
Consumer		111		(54	)		33		29			119		-		119
Other commercial and agricultural loans		674		(21	)		7		68			728		1		727
State and political subdivision loans		235		-			-		36			271		-		271
Unallocated		515		-			-		(199	)		316		-		316
Total	$	6,487	$	(172	)	$	49	$	420		$	6,784	$	582	$	6,202

	Balance at December 31, 2010		Charge-offs			Recoveries		Provision			Balance at December 31, 2011		Individually evaluated for impairment		Collectively evaluated for impairment
Real estate loans:
Residential	$	969	$	(101	)	$	-	$	(63	)	$	805	$	13	$	792
Commercial and agricultural		3,380		(29	)		15		766			4,132		433		3,699
Construction		22		-			-		(7	)		15		-		15
Consumer		108		(71	)		57		17			111		-		111
Other commercial and agricultural loans		983		(6	)		32		(335	)		674		48		626
State and political subdivision loans		137		-			-		98			235		-		235
Unallocated		316		-			-		199			515		-		515
Total	$	5,915	$	(207	)	$	104	$	675		$	6,487	$	494	$	5,993