Loans (Tables)

3 Months Ended

Mar. 31, 2014

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 March 31, 2014 and December 31, 2013 (in thousands):

March 31, 2014	Total Loans	Individually evaluated for impairment	Collectively evaluated for impairment
Real estate loans:
Residential	$ 185,904	$ 335	$ 185,569
Commercial and agricultural	214,030	8,441	205,589
Construction	3,510	-	3,510
Consumer	9,056	15	9,041
Other commercial and agricultural loans	55,468	2,023	53,445
State and political subdivision loans	65,255	-	65,255
Total	533,223	$ 10,814	$ 522,409
Allowance for loan losses	7,233
Net loans	$ 525,990
December 31, 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

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
March 31, 2014	Balance	Allowance	Allowance	Investment	Allowance
Real estate loans:
Mortgages	$ 228	$ 133	$ 69	$ 202	$ 14
Home Equity	133	65	68	133	13
Commercial	10,141	6,485	1,956	8,441	504
Agricultural	-	-	-	-	-
Construction	-	-	-	-	-
Consumer	15	15	-	15	-
Other commercial loans	2,086	1,770	253	2,023	145
Other agricultural loans	-	-	-	-	-
State and political
subdivision loans	-	-	-	-	-
Total	$ 12,603	$ 8,468	$ 2,346	$ 10,814	$ 676

December 31, 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

The following table includes the average balance of impaired financing receivables by class and the income recognized on impaired loans for the three month period ended March 31, 2014 and 2013(in thousands):

	March 31, 2014			March 31, 2013
			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	$ 205	$ 2	$ -	$ 284	$ 2	$ -
Home Equity	133	1	-	137	1	-
Commercial	8,533	26	-	8,785	45	14
Agricultural	-	-	-	-	-	-
Construction	-	-	-	-	-	-
Consumer	15	-	-	-	-	-
Other commercial loans	1,893	33	-	1,656	19	-
Other agricultural loans	-	-	-	-	-	-
State and political
subdivision loans	-	-	-	-	-	-
Total	$ 10,779	$ 62	$ -	$ 10,862	$ 67	$ 14

Summary of financing receivable credit exposures by internally assigned grades

The following tables represent credit exposures by internally assigned grades as of March 31, 2014 and December 31, 2013 (in thousands):

March 31, 2014	Pass	Special Mention	Substandard	Doubtful	Loss	Ending Balance
Real estate loans:
Commercial	$ 167,432	$ 5,399	$ 19,493	$ 461	$ -	$ 192,785
Agricultural	15,574	1,556	4,115	-	-	21,245
Construction	3,510	-	-	-	-	3,510
Other commercial loans	37,586	6,198	2,024	205	-	46,013
Other agricultural loans	7,453	131	1,871	-	-	9,455
State and political
subdivision loans	65,255	-	-	-	-	65,255
Total	$ 296,810	$ 13,284	$ 27,503	$ 666	$ -	$ 338,263

December 31, 2013
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

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 March 31, 2014 and December 31, 2013 (in thousands):

March 31, 2014	Performing	Non-performing	Total
Real estate loans:
Mortgages	$ 120,033	$ 964	$ 120,997
Home Equity	64,766	141	64,907
Consumer	9,041	15	9,056
Total	$ 193,840	$ 1,120	$ 194,960

December 31, 2013
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

Age analysis of past due financing receivables

The following table includes an aging analysis of the recorded investment of past due financing receivables as of March 31, 2014 and December 31, 2013 (in thousands):

		30-59 Days	60-89 Days	90 Days	Total Past		Total Financing	90 Days and
March 31,2014		Past Due	Past Due	Or Greater	Due	Current	Receivables	Accruing
Real estate loans:
Mortgages		$ 46	$ 93	$ 805	$ 944	$ 120,053	$ 120,997	$ 262
Home Equity		406	84	104	594	64,313	64,907	31
Commercial		825	83	2,999	3,907	188,878	192,785	305
Agricultural		-	-	-	-	21,245	21,245	-
Construction		-	-	-	-	3,510	3,510	-
Consumer		71	21	15	107	8,949	9,056	-
Other commercial loans		102	111	588	801	45,212	46,013	334
Other agricultural loans		-	-	-	-	9,455	9,455	-
State and political
subdivision loans		-	-	-	-	65,255	65,255	-
	Total	$ 1,450	$ 392	$ 4,511	$ 6,353	$ 526,870	$ 533,223	$ 932

Loans considered non-accrual		$ 257	$ 174	$ 3,579	$ 4,010	$ 4,223	$ 8,233
Loans still accruing		1,193	218	932	2,343	522,647	524,990
	Total	$ 1,450	$ 392	$ 4,511	$ 6,353	$ 526,870	$ 533,223

December 31, 2013
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

Summary of financing receivables on nonaccrual status

The following table reflects the financing receivables on non-accrual status as of March 31, 2014 and December 31, 2013, respectively. The balances are presented by class of financing receivable (in thousands):

	March 31, 2014	December 31, 2013
Real estate loans:
Mortgages	$ 702	$ 508
Home Equity	110	177
Commercial	7,066	7,247
Agricultural	-	-
Construction	-	-
Consumer	15	15
Other commercial loans	340	150
Other agricultural loans	-	-
State and political subdivision	-	-
	$ 8,233	$ 8,097

Summary of troubled debt restructurings on financing receivables

Loan modifications that are considered TDR’s completed during the three months ended March 31, 2014 and 2013 were as follows (dollars in thousands):

	For the Three Months Ended March 31, 2014
	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	$ -	$ 125	$ -	$ 125
Total	-	1	$ -	$ 125	$ -	$ 125

	For the Three Months Ended March 31, 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:
Residential	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

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, 2014 and 2013 (three month periods), respectively, and that subsequently defaulted during these reporting periods (dollars in thousands):

	For the Three Months Ended
	March 31, 2014		March 31, 2013
	Number of contracts	Recorded investment	Number of contracts	Recorded investment
Real estate loans:
Commercial	1	$ 483	-	$ -
Total recidivism	1	$ 483	-	$ -

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 March 31, 2014 and December 31, 2013, respectively (in thousands):

	March 31, 2014			December 31, 2013
	Individually evaluated for impairment	Collectively evaluated for impairment	Total	Individually evaluated for impairment	Collectively evaluated for impairment	Total
Real estate loans:
Residential	$ 27	$ 859	$ 886	$ 27	$ 919	$ 946
Commercial and agricultural	504	4,026	4,530	305	4,253	4,558
Construction	-	8	8	-	50	50
Consumer	-	83	83	-	105	105
Commercial and other loans	145	1,028	1,173	1	941	942
State and political
subdivision loans	-	396	396	-	330	330
Unallocated	-	157	157	-	167	167
Total	$ 676	$ 6,557	$ 7,233	$ 333	$ 6,765	$ 7,098

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 month period ended March 31, 2014 and 2013, respectively (in thousands):

	Balance at December 31, 2013	Charge-offs	Recoveries	Provision	Balance at March 31, 2014
Real estate loans:
Residential	$ 946	$ (38)	$ -	$ (22)	$ 886
Commercial and agricultural	4,558	(10)	2	(20)	4,530
Construction	50	-	-	(42)	8
Consumer	105	(8)	9	(23)	83
Commercial and other loans	942	-	-	231	1,173

State and political				-
subdivision loans	330	-	-	66	396
Unallocated	167	-	-	(10)	157
Total	$ 7,098	$ (56)	$ 11	$ 180	$ 7,233

	Balance at December 31, 2012	Charge-offs	Recoveries	Provision	Balance at March 31, 2013
Real estate loans:
Residential	$ 875	$ -	$ 2	$ 36	$ 913
Commercial and agricultural	4,437	-	-	(21)	4,416
Construction	38	-	-	40	78
Consumer	119	(20)	12	7	118
Commercial and other loans	728	-	-	(28)	700
State and political				-
subdivision loans	271	-	-	32	303
Unallocated	316	-	-	84	400
Total	$ 6,784	$ (20)	$ 14	$ 150	$ 6,928