LOANS AND ALLOWANCE FOR CREDIT LOSSES

Outstanding loans are summarized as follows (in thousands):



Loan Type	December 31, 2013			% of Total loans		December 31, 2012			% of Total loans
Commercial:
Commercial and industrial	$	87,082		17.0	%	$	77,956		19.7	%
Agricultural land and production	31,649			6.1	%	26,599			6.7	%
Total commercial	118,731			23.1	%	104,555			26.4	%
Real estate:
Owner occupied	156,781			30.6	%	114,444			28.9	%
Real estate construction and other land loans	42,329			8.3	%	33,199			8.4	%
Commercial real estate	86,117			16.8	%	53,797			13.6	%
Agricultural real estate	44,164			8.6	%	28,400			7.2	%
Other real estate	4,548			0.9	%	8,098			2.0	%
Total real estate	333,939			65.2	%	237,938			60.1	%
Consumer:
Equity loans and lines of credit	48,594			9.5	%	42,932			10.9	%
Consumer and installment	11,252			2.2	%	10,346			2.6	%
Total consumer	59,846			11.7	%	53,278			13.5	%
Deferred loan fees, net	(159		)			(453		)
Total gross loans	512,357			100.0	%	395,318			100.0	%
Allowance for credit losses	(9,208		)			(10,133		)
Total loans	$	503,149				$	385,185

The table above includes loans acquired at fair value on July 1, 2013 with outstanding balances of $99,948,000 as of December 31, 2013

At December 31, 2013 and 2012, loans originated under Small Business Administration (SBA) programs totaling $7,345,000 and $5,586,000, respectively, were included in the real estate and commercial categories. Approximately $119,539,000 in loans were pledged under a blanket lien as collateral to the FHLB for the Bank’s remaining borrowing capacity of $272,797,000 as of December 31, 2013. The Bank’s credit limit varies according to the amount and composition of the investment and loan portfolios pledged as collateral.

Salaries and employee benefits totaling $1,373,000, $754,000, and $229,000 have been deferred as loan origination costs for the years ended December 31, 2013, 2012, and 2011, respectively.

Purchased Credit Impaired Loans

The Company has loans that were acquired in an acquisition, for which there was, at acquisition, evidence of deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected.

These purchased credit impaired (PCI) loans are recorded at the amount paid, such that there is no carryover of the seller’s allowance for loan losses. After acquisition, losses are recognized by an increase in the allowance for loan losses. The Company estimates the amount and timing of expected cash flows for each PCI loan and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan (accretable yield). The excess of each PCI loan’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference). Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

The carrying amount of PCI loans is included in the balance sheet amounts of loans receivable at December 31, 2013. The amounts of PCI loans at December 31, 2013 and 2012 are as follows (in thousands):



	December 31,
	2013		2012
Real estate	$	2,465	$	—
Outstanding balance	$	2,465	$	—
Carrying amount, net of allowance of $0	$	2,465	$	—

Accretable yield, or income expected to be collected on PCI loans for the year ended December 31, 2013, 2012, and 2011 is as follows (in thousands):



	Years ended December 31,
	2013			2012		2011
Balance at beginning of year	$	—		$	—	$	—
New loans acquired	105			—		—
Accretion of income	(124		)	—		—
Reclassification from (to) non-accretable difference	113			—		—
Disposals	—			—		—
Balance at end of year	$	94		$	—	$	—

During the year ended December 31, 2013, the Company did not increase or decrease the allowance for loan losses with respect to PCI loans.

Loans acquired during each period or year for which it was probable at acquisition that all contractually required payments would not be collected are as follows (in thousands):



	December 31,
	2013		2012
Contractually required payments receivable on PCI loans at acquisition:
Real estate	$	6,912	$	—
Total	$	6,912	$	—
Cash flows expected to be collected at acquisition	$	2,681	$	—
Fair value of acquired loans at acquisition	$	2,576	$	—

Certain of the loans acquired by the Company that are within the scope of Topic ASC 310-30 are not accounted for using the income recognition model of the Topic because the Company cannot reliably estimate cash flows expected to be collected. The carrying amounts of such loans (which are included in the carrying amount, net of allowance, described above) are as follows (in thousands):



	December 31,
	2013		2012
Loans acquired during the year	$	1,324	$	—
Loans at the end of the year	$	1,324	$	—