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Loans | 3 Months Ended
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Mar. 31, 2013
Loans [Abstract] |
LOANS | NOTE 4 LOANS The Company had $350.9 thousand in loans held for sale as of March 31, 2013 as compared to $2.5 million in loans held for sale on December 31, 2012. Due to lack of materiality, these loans are included in the Consumer Real Estate loans below. Loan balances as of March 31, 2013 and December 31, 2012:
|  | (In Thousands) |
Loans: |  | March 31, 2013 |  |  | December 31, 2012 |
Commercial real estate |  | $ | 209,601 |  |  | $ | 199,999 |
Agricultural real estate |  |  | 35,898 |  |  |  | 40,143 |
Consumer real estate |  |  | 77,160 |  |  |  | 80,287 |
Commercial and industrial |  |  | 89,779 |  |  |  | 101,624 |
Agricultural |  |  | 51,896 |  |  |  | 57,770 |
Consumer |  |  | 19,489 |  |  |  | 20,413 |
Industrial Development Bonds |  |  | 1,202 |  |  |  | 1,299 |
|  | $ | 485,025 |  |  | $ | 501,535 |
Less: Net deferred loan fees and costs |  |  | (197 | ) |  |  | (133 | )
|  |  | 484,828 |  |  |  | 501,402 |
Less: Allowance for loan losses |  |  | (5,344 | ) |  |  | (5,224 | )
Loans - Net |  | $ | 479,484 |  |  | $ | 496,178 |
The following is a maturity schedule by major category of loans as of March 31, 2013:
|  | (In Thousands) |
|  | Within One Year |  |  | After One Year Within Five Years |  |  | After Five Years |
Commercial Real Estate |  | $ | 44,598 |  |  | $ | 98,274 |  |  | $ | 66,729 |
Agricultural Real Estate |  |  | 2,499 |  |  |  | 9,169 |  |  |  | 24,230 |
Consumer Real Estate |  |  | 9,244 |  |  |  | 14,815 |  |  |  | 53,101 |
Commercial/Industrial |  |  | 61,763 |  |  |  | 24,744 |  |  |  | 3,272 |
Agricultural |  |  | 30,669 |  |  |  | 18,996 |  |  |  | 2,231 |
Consumer |  |  | 4,898 |  |  |  | 12,602 |  |  |  | 1,792 |
Industrial Development Bonds |  |  | 320 |  |  |  | 490 |  |  |  | 392 |
The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of March 31, 2013. Variable rate loans whose current rates are equal to their floor or ceiling are classified as fixed in this table.
|  | (In Thousands) |
|  | Fixed Rate |  |  | Variable Rate |
Commercial Real Estate |  | $ | 114,221 |  |  | $ | 95,380 |
Agricultural Real Estate |  |  | 26,672 |  |  |  | 9,226 |
Consumer Real Estate |  |  | 62,672 |  |  |  | 14,488 |
Commercial/Industrial |  |  | 67,170 |  |  |  | 22,609 |
Agricultural |  |  | 48,375 |  |  |  | 3,521 |
Consumer |  |  | 15,206 |  |  |  | 4,086 |
Industrial Development Bonds |  |  | 1,202 |  |  |  | — |
As of March 31, 2013 and December 31, 2012 one to four family residential mortgage loans amounting to $25.6 and $26.8 million, respectively, have been pledged as security for loans the Bank has received from the Federal Home Loan Bank. The percentage of delinquent loans has trended downward since the beginning of January 2010 from a high of 2.85% of total loans to a low of .64% as of March 31, 2012. As of March 31, 2013, past dues were 1.21%. These percentages do not include nonaccrual loans which are not past due (nonaccruals are not considered past due if current). This level of delinquency is due in part to an adherence to sound underwriting practices over the course of time, an improvement in the financial status of companies to which the Bank extends credit, continued financial stability in the agricultural loan portfolio, and the writing down of uncollectable credits in a timely manner. Industrial Development Bonds are included in the commercial and industrial category for the remainder of the tables in this Note 4. The following table represents the contractual aging of the recorded investment in past due loans by portfolio segment of loans as of March 31, 2013 and December 31, 2012, net of deferred fees:
|  | (In Thousands) |
March 31, 2013 |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Greater Than 90 Days Past Due |  |  | Total Past Due |  |  | Current |  |  | Total Financing Receivables |  |  | Recorded Investment > 90 Days and Accruing |
Consumer real estate |  | $ | 613 |  |  | $ | — |  |  | $ | 310 |  |  | $ | 923 |  |  | $ | 76,237 |  |  | $ | 77,160 |  |  | $ | — |
Agricultural real estate |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 35,898 |  |  |  | 35,898 |  |  |  | — |
Agricultural |  |  | 9 |  |  |  | — |  |  |  | — |  |  |  | 9 |  |  |  | 51,887 |  |  |  | 51,896 |  |  |  | — |
Commercial Real Estate |  |  | 1,228 |  |  |  | 139 |  |  |  | 845 |  |  |  | 2,212 |  |  |  | 207,389 |  |  |  | 209,601 |  |  |  | — |
Commercial and Industrial |  |  | 154 |  |  |  | 27 |  |  |  | 2,528 |  |  |  | 2,709 |  |  |  | 88,272 |  |  |  | 90,981 |  |  |  | — |
Consumer |  |  | 27 |  |  |  | 18 |  |  |  | 3 |  |  |  | 48 |  |  |  | 19,244 |  |  |  | 19,292 |  |  |  | 3 |
Total |  | $ | 2,031 |  |  | $ | 184 |  |  | $ | 3,686 |  |  | $ | 5,901 |  |  | $ | 478,927 |  |  | $ | 484,828 |  |  | $ | 3 |
December 31, 2012 |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Greater Than 90 Days Past Due |  |  | Total Past Due |  |  | Current |  |  | Total Financing Receivables |  |  | Recorded Investment > 90 Days and Accruing |
Consumer real estate |  | $ | 575 |  |  | $ | — |  |  | $ | 648 |  |  | $ | 1,223 |  |  | $ | 79,064 |  |  | $ | 80,287 |  |  | $ | — |
Agricultural real estate |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 40,143 |  |  |  | 40,143 |  |  |  | — |
Agricultural |  |  | 11 |  |  |  | — |  |  |  | — |  |  |  | 11 |  |  |  | 57,759 |  |  |  | 57,770 |  |  |  | — |
Commercial Real Estate |  |  | — |  |  |  | — |  |  |  | 877 |  |  |  | 877 |  |  |  | 199,122 |  |  |  | 199,999 |  |  |  | — |
Commercial and Industrial |  |  | 78 |  |  |  | — |  |  |  | 2,567 |  |  |  | 2,645 |  |  |  | 100,278 |  |  |  | 102,923 |  |  |  | — |
Consumer |  |  | 65 |  |  |  | 7 |  |  |  | — |  |  |  | 72 |  |  |  | 20,208 |  |  |  | 20,280 |  |  |  | 1 |
Total |  | $ | 729 |  |  | $ | 7 |  |  | $ | 4,092 |  |  | $ | 4,828 |  |  | $ | 496,574 |  |  | $ | 501,402 |  |  | $ | 1 |
The following table presents the recorded investment in nonaccrual loans by class of loans as of March 31, 2013 and December 31, 2012:
|  | (In Thousands) |
|  | March 31 2013 |  |  | December 31 2012 |
Consumer real estate |  | $ | 689 |  |  | $ | 964 |
Agricultural real estate |  |  | — |  |  |  | — |
Agricultural |  |  | — |  |  |  | 0 |
Commercial Real Estate |  |  | 944 |  |  |  | 877 |
Commercial and Industrial |  |  | 2,949 |  |  |  | 2,987 |
Consumer |  |  | — |  |  |  | — |
Total |  | $ | 4,582 |  |  | $ | 4,828 |
The Bank uses a nine tier risk rating system to grade its loans. The grade of a loan may change during the life of the loan. The risk ratings are described as follows.
| 1. | Zero (0) Unclassified. Any loan which has not been assigned a classification.
| 2. | One (1) Excellent. Credit to premier customers having the highest credit rating based on an extremely strong financial condition, which compares favorably with industry standards (upper quartile of Risk Management Association ratios). Financial statements indicate a sound earnings and financial ratio trend for several years with satisfactory profit margins and excellent liquidity exhibited. Prime credits may also be borrowers with loans fully secured by highly liquid collateral such as traded stocks, bonds, certificates of deposit, savings account, etc. No credit or collateral exceptions exist and the loan adheres to the Bank’s loan policy in every respect. Financing alternatives would be readily available and would qualify for unsecured credit. This grade is summarized by high liquidity, minimum risk, strong ratios, and low handling costs.
| 3. | Two (2) Good. Desirable loans of somewhat less stature than Grade 1, but with strong financial statements. Loan supported by financial statements containing strong balance sheets, generally with a leverage position less than 1.50, and a history of profitability. Probability of serious financial deterioration is unlikely. Possessing a sound repayment source (and a secondary source), which would allow repayment in a reasonable period of time. Individual loans backed by liquid personal assets, established history and unquestionable character.
| 4. | Three (3) Satisfactory. Satisfactory loans of average or slightly above average risk – having some deficiency or vulnerability to changing economic conditions, but still fully collectible. Projects should normally demonstrate acceptable debt service coverage. Generally, customers should have a leverage position less than 2.00. May be some weakness but with offsetting features of other support readily available. Loans that are meeting the terms of repayment.
Loans may be graded 3 when there is no recent information on which to base a current risk evaluation and the following conditions apply: At inception, the loan was properly underwritten and did not possess an unwarranted level of credit risk:
| a. | At inception, the loan was secured with collateral possessing a loan value adequate to protect the Bank from loss;
| b. | The loan exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance;
| c. | During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the business is in an industry which is known to be experiencing problems. If any of the credit weaknesses is observed, a lower risk grade is warranted.
| 5. | Four (4) Satisfactory / Monitored. A “4” (Satisfactory/Monitored) risk grade may be established for a loan considered satisfactory but which is of average credit risk due to financial weakness or uncertainty. The loans warrant a higher than average level of monitoring to ensure that weaknesses do not advance. The level of risk in Satisfactory/Monitored classification is considered acceptable and within normal underwriting guidelines, so long as the loan is given management supervision.
| 6. | Five (5) Special Mention. Loans that possess some credit deficiency or potential weakness which deserves close attention, but which do not yet warrant substandard classification. Such loans pose unwarranted financial risk that, if not corrected, could weaken the loan and increase risk in the future. The key distinctions of a 5 (Special Mention) classification are that (1) it is indicative of an unwarranted level of risk, and (2) weaknesses are considered “potential”, versus “defined”, impairments to the primary source of loan repayment and collateral.
| 7. | Six (6) Substandard. One or more of the following characteristics may be exhibited in loans classified substandard:
| a. | Loans, which possess a defined credit weakness and the likelihood that a loan will be paid from the primary source, are uncertain. Financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss.
| b. | Loans are inadequately protected by the current net worth and paying capacity of the borrower.
| c. | The primary source of repayment is weakened, and the Bank is forced to rely on a secondary source of repayment such as collateral liquidation or guarantees.
| d. | Loans are characterized by the distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.
| e. | Unusual courses of action are needed to maintain a high probability of repayment.
| f. | The borrower is not generating enough cash flow to repay loan principal; however, continues to make interest payments.
| g. | The lender is forced into a subordinate position or unsecured collateral position due to flaws in documentation.
| h. | Loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms.
| i. | The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan.
| j. | There is significant deterioration in the market conditions and the borrower is highly vulnerable to these conditions.
| 8. | Seven (7) Doubtful. One or more of the following characteristics may be exhibited in loans classified Doubtful:
| a. | Loans have all of the weaknesses of those classified as Substandard. Additionally, however, these weaknesses make collection or liquidation in full based on existing conditions improbable.
| b. | The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.
| c. | The possibility of loss is high, but, because of certain important pending factors which may strengthen the loan, loss classification is deferred until its exact status is known. A Doubtful classification is established deferring the realization of the loss.
| 9. | Eight (8) Loss. Loans are considered uncollectable and of such little value that continuing to carry them as assets on the institution’s financial statements is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.
The following table represents the risk category of loans by portfolio segment based on the most recent analysis performed as of March 31, 2013 and December 31, 2012:
|  | Agriculture Real Estate |  |  | Agriculture |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Industrial Development Bonds |
(in Thousands) |  |  |  |  |
March 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-2 |  | $ | 2,255 |  |  | $ | 2,883 |  |  | $ | 3,264 |  |  | $ | 57 |  |  | $ | — |
3 |  |  | 13,837 |  |  |  | 16,509 |  |  |  | 52,354 |  |  |  | 22,021 |  |  |  | 858 |
4 |  |  | 18,979 |  |  |  | 32,469 |  |  |  | 139,030 |  |  |  | 60,990 |  |  |  | 344 |
5 |  |  | 790 |  |  |  | 35 |  |  |  | 8,672 |  |  |  | 2,404 |  |  |  | — |
6 |  |  | 37 |  |  |  | — |  |  |  | 6,237 |  |  |  | 1,600 |  |  |  | — |
7 |  |  | — |  |  |  | — |  |  |  | 44 |  |  |  | 2,707 |  |  |  | — |
8 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 35,898 |  |  | $ | 51,896 |  |  | $ | 209,601 |  |  | $ | 89,779 |  |  | $ | 1,202 |
|  | Agriculture Real Estate |  |  | Agriculture |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Industrial Development Bonds |
December 31, 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-2 |  | $ | 2,719 |  |  | $ | 5,022 |  |  | $ | 4,046 |  |  | $ | 750 |  |  | $ | 97 |
3 |  |  | 15,111 |  |  |  | 23,525 |  |  |  | 42,467 |  |  |  | 21,750 |  |  |  | 859 |
4 |  |  | 21,481 |  |  |  | 29,188 |  |  |  | 137,537 |  |  |  | 71,228 |  |  |  | 343 |
5 |  |  | 794 |  |  |  | 35 |  |  |  | 8,984 |  |  |  | 3,385 |  |  |  | — |
6 |  |  | 38 |  |  |  | — |  |  |  | 6,295 |  |  |  | 2,202 |  |  |  | — |
7 |  |  | — |  |  |  | — |  |  |  | 670 |  |  |  | 2,309 |  |  |  | — |
8 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 40,143 |  |  | $ | 57,770 |  |  | $ | 199,999 |  |  | $ | 101,624 |  |  | $ | 1,299 |
For consumer residential real estate, and other, the Company also evaluates credit quality based on the aging status of the loan, which was previously stated, and by payment activity. The following tables present the recorded investment in those classes based on payment activity and assigned risk grading as of March 31, 2013 and December 31, 2012.
|  | (In Thousands) |
|  | Consumer Real Estate |  |  | Consumer Real Estate |
|  | March 31 2013 |  |  | December 31 2012 |
Grade |  |  |  |  |  |  |  |
Pass |  | $ | 76,850 |  |  | $ | 79,766 |
Special Mention (5) |  |  | — |  |  |  | — |
Substandard (6) |  |  | 33 |  |  |  | 110 |
Doubtful (7) |  |  | 277 |  |  |  | 411 |
Total |  | $ | 77,160 |  |  | $ | 80,287 |
|  | (In Thousands) |
|  | Consumer - Credit |  |  | Consumer - Other |
|  | March 31 2013 |  |  | December 31 2012 |  |  | March 31 2013 |  |  | December 31 2012 |
Performing |  | $ | 3,340 |  |  | $ | 3,470 |  |  | $ | 15,931 |  |  | $ | 16,775 |
Nonperforming |  |  | — |  |  |  | 3 |  |  |  | 21 |  |  |  | 32 |
Total |  | $ | 3,340 |  |  | $ | 3,473 |  |  | $ | 15,952 |  |  | $ | 16,807 |
Information about impaired loans as of March 31, 2013, December 31, 2012 and March 31, 2012 are as follows:
|  | (In Thousands) |
|  | March 31, 2013 |  |  | December 31, 2012 |  |  | March 31, 2012 |
Impaired loans without a valuation allowance |  | $ | 1,119 |  |  | $ | 730 |  |  | $ | 362 |
Impaired loans with a valuation allowance |  |  | 3,025 |  |  |  | 3,861 |  |  |  | 1,505 |
Total impaired loans |  | $ | 4,144 |  |  | $ | 4,591 |  |  | $ | 1,867 |
Valuation allowance related to impaired loans |  | $ | 860 |  |  | $ | 865 |  |  | $ | 191 |
Total non-accrual loans |  | $ | 4,582 |  |  | $ | 4,828 |  |  | $ | 2,923 |
Total loans past-due ninety days or more and still accruing |  | $ | 3 |  |  | $ | 1 |  |  | $ | — |
For three months ended: |  |  |  |  |  |  |  |  |  |  |  |
Average investment in impaired loans |  | $ | 4,321 |  |  | $ | 4,468 |  |  | $ | 1,954 |
No additional funds are committed to be advanced in connection with impaired loans. The Bank had approximately $670 thousand of its impaired loans classified as troubled debt restructured as of March 31, 2013 and $207 thousand as of March 31, 2012. The following table represents three months ended March 31, 2013.
|  | March 31, 2013 |
Troubled Debt Restructurings |  | Number of Contracts Modified in the Last 3 Months |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post- Modification Outstanding Recorded Investment |
Commercial Real Estate |  |  | — |  |  | $ | — |  |  | $ | — |
Ag Real Estate |  |  | — |  |  |  | — |  |  |  | — |
Commercial and Industrial |  |  | 1 |  |  |  | 81 |  |  |  | 43 |
Troubled Debt Restructurings That Subsequently Defaulted |  | Number of Contracts Modified in the Last 3 Months |  |  | Recorded Investment |
Commercial Real Estate |  |  | — |  |  | $ | — |
Ag Real Estate |  |  | — |  |  |  | — |
Commercial and Industrial |  |  | — |  |  |  | — |
The following table represents three months ended March 31, 2012.
|  | March 31, 2012 |
Troubled Debt Restructurings |  | Number of Contracts Modified in the Last 3 Months |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post- Modification Outstanding Recorded Investment |
Commercial Real Estate |  |  | — |  |  | $ | — |  |  | $ | — |
Ag Real Estate |  |  | — |  |  |  | — |  |  |  | — |
Commercial and Industrial |  |  | — |  |  |  | — |  |  |  | — |
Troubled Debt Restructurings That Subsequently Defaulted |  | Number of Contracts Modified in the Last 3 Months |  |  | Recorded Investment |
Commercial Real Estate |  |  | — |  |  | $ | — |
Ag Real Estate |  |  | — |  |  |  | — |
Commercial and Industrial |  |  | — |  |  |  | — |
For the majority of the Bank’s impaired loans, the Bank will apply the observable market price methodology. However, the Bank may also utilize a measurement incorporating the present value of expected future cash flows discounted at the loan’s effective rate of interest. To determine observable market price, collateral asset values securing an impaired loan are periodically evaluated. Maximum time for re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained and heavily relied upon. Until such time that updated appraisals are received, the Bank may discount the collateral value used. The Bank uses the following guidelines as stated in policy to determine when to realize a charge-off, whether a partial or full loan balance. A charge-off in whole or in part is realized when unsecured consumer loans, credit card credits and overdraft lines of credit reach 90 days delinquency. At 120 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency. Commercial and agricultural credits are charged down at 120 days delinquency, unless an established and approved work-out plan is in place or litigation of the credit will likely result in recovery of the loan balance. Upon notification of bankruptcy, unsecured debt is charged off. Additional charge-off may be realized as further unsecured positions are recognized. The following table presents loans individually evaluated for impairment by class of loans for three months ended March 31, 2013.
Three Months Ended March 31, 2013 |  |  |  |  | Unpaid |  |  |  |  |  | Average |  |  | Interest |
|  | Recorded |  |  | Principal |  |  | Related |  |  | Recorded |  |  | Income |
|  | Investment |  |  | Balance |  |  | Allowance |  |  | Investment |  |  | Recognized |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer real estate |  | $ | 33 |  |  | $ | 33 |  |  | $ | — |  |  | $ | 60 |  |  | $ | 1 |
Agriculture real estate |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Agriculture |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial real estate |  |  | 801 |  |  |  | 1,225 |  |  |  | — |  |  |  | 207 |  |  |  | — |
Commercial and industrial |  |  | 285 |  |  |  | 285 |  |  |  | — |  |  |  | 286 |  |  |  | — |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
With a specific allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer real estate |  |  | 277 |  |  |  | 349 |  |  |  | 79 |  |  |  | 131 |  |  |  | 3 |
Agriculture real estate |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Agriculture |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial real estate |  |  | 44 |  |  |  | 64 |  |  |  | 29 |  |  |  | 6,250 |  |  |  | — |
Commercial and industrial |  |  | 2,704 |  |  |  | 2,704 |  |  |  | 751 |  |  |  | 2,743 |  |  |  | — |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Totals: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer real estate |  | $ | 310 |  |  | $ | 382 |  |  | $ | 79 |  |  | $ | 191 |  |  | $ | 4 |
Agriculture real estate |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Agriculture |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial real estate |  | $ | 845 |  |  | $ | 1,289 |  |  | $ | 29 |  |  | $ | 6,457 |  |  | $ | — |
Commercial and industrial |  | $ | 2,989 |  |  | $ | 2,989 |  |  | $ | 751 |  |  | $ | 3,029 |  |  | $ | — |
Consumer |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Three Months Ended March 31, 2012 |  |  |  |  | Unpaid |  |  |  |  |  | Average |  |  | Interest |
|  | Recorded |  |  | Principal |  |  | Related |  |  | Recorded |  |  | Income |
|  | Investment |  |  | Balance |  |  | Allowance |  |  | Investment |  |  | Recognized |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer real estate |  | $ | 155 |  |  | $ | 155 |  |  | $ | — |  |  | $ | 158 |  |  | $ | 3 |
Agriculture real estate |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Agriculture |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial real estate |  |  | 207 |  |  |  | 384 |  |  |  | — |  |  |  | 207 |  |  |  | — |
Commercial and industrial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
With a specific allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  |  |  |
Consumer real estate |  |  | 312 |  |  |  | 312 |  |  |  | 65 |  |  |  | 390 |  |  |  | 3 |
Agriculture real estate |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Agriculture |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial real estate |  |  | 696 |  |  |  | 846 |  |  |  | 22 |  |  |  | 702 |  |  |  | — |
Commercial and industrial |  |  | 493 |  |  |  | 493 |  |  |  | 104 |  |  |  | 493 |  |  |  | — |
Consumer |  |  | 4 |  |  |  | 4 |  |  |  | — |  |  |  | 4 |  |  |  | 2 |
Totals: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer real estate |  | $ | 467 |  |  | $ | 467 |  |  | $ | 65 |  |  | $ | 548 |  |  | $ | 6 |
Agriculture real estate |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Agriculture |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial real estate |  | $ | 903 |  |  | $ | 1,230 |  |  | $ | 22 |  |  | $ | 909 |  |  | $ | — |
Commercial and industrial |  | $ | 493 |  |  | $ | 493 |  |  | $ | 104 |  |  | $ | 493 |  |  | $ | — |
Consumer |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | 4 |  |  | $ | 2 |
The ALLL has a direct impact on the provision expense. An increase in the ALLL is funded through recoveries and provision expense. The following tables summarize the activities in the allowance for credit losses.
|  | (In Thousands) |
|  | Three Months Ended |  |  | Twelve Months Ended |
|  | March 31, 2013 |  |  | December 31, 2012 |
Allowance for Loan Losses |  |  |  |  |  |  |  |
Balance at beginning of year |  | $ | 5,224 |  |  | $ | 5,091 |
Provision for loan loss |  |  | 167 |  |  |  | 738 |
Loans charged off |  |  | (116 | ) |  |  | (891 | )
Recoveries |  |  | 69 |  |  |  | 286 |
Allowance for Loan & Leases Losses |  | $ | 5,344 |  |  | $ | 5,224 |
Allowance for Unfunded Loan Commitments & Letters of Credit |  | $ | 172 |  |  | $ | 162 |
Total Allowance for Credit Losses |  | $ | 5,516 |  |  | $ | 5,386 |
The Company segregates its Allowance for Loan and Lease Losses (ALLL) into two reserves: The ALLL and the Allowance for Unfunded Loan Commitments and Letters of Credit (AULC). When combined, these reserves constitute the total Allowance for Credit Losses (ACL). The AULC is reported within other liabilities on the balance sheet while the ALLL is netted within the loans, net asset line. The ACL presented above represents the full amount of reserves available to absorb possible credit losses. The following table breaks down the activity within ALLL for each loan portfolio segment and shows the contribution provided by both the recoveries and the provision along with the reduction of the allowance caused by charge-offs. Additional analysis related to the allowance for credit losses for three months ended March 31, 2013 is as follows (in thousands):
|  | Consumer Real Estate |  |  | Agriculture Real Estate |  |  | Agriculture |  |  | Commercial Real Estate |  |  | Commercial |  |  | Consumer (incl. Credit Cards) |  |  | Unfunded Loan Commitment & Letters of Credit |  |  | Unallocated |  |  | Total |
Three Months Ended March 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ALLOWANCE FOR CREDIT LOSSES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 368 |  |  | $ | 113 |  |  | $ | 290 |  |  | $ | 1,749 |  |  | $ | 2,183 |  |  | $ | 268 |  |  | $ | 162 |  |  | $ | 253 |  |  | $ | 5,386 |
Charge Offs |  |  | (10 | ) |  |  | — |  |  |  | — |  |  |  | (20 | ) |  |  | — |  |  |  | (86 | ) |  |  | — |  |  |  | — |  |  | $ | (116 | )
Recoveries |  |  | 4 |  |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | 15 |  |  |  | 49 |  |  |  | — |  |  |  | — |  |  | $ | 69 |
Provision |  |  | 101 |  |  |  | (8 | ) |  |  | (31 | ) |  |  | (163 | ) |  |  | (226 | ) |  |  | 25 |  |  |  | — |  |  |  | 469 |  |  | $ | 167 |
Other Non-interest expense related to unfunded |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10 |  |  |  | — |  |  | $ | 10 |
Ending Balance |  | $ | 463 |  |  | $ | 105 |  |  | $ | 260 |  |  | $ | 1,566 |  |  | $ | 1,972 |  |  | $ | 256 |  |  | $ | 172 |  |  | $ | 722 |  |  | $ | 5,516 |
Ending balance: individually evaluated for impairment |  | $ | 79 |  |  | $ | — |  |  | $ | — |  |  | $ | 29 |  |  | $ | 752 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 860 |
Ending balance: collectively evaluated for impairment |  | $ | 384 |  |  | $ | 105 |  |  | $ | 260 |  |  | $ | 1,537 |  |  | $ | 1,220 |  |  | $ | 256 |  |  | $ | 172 |  |  | $ | 722 |  |  | $ | 4,656 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1 |
FINANCING RECEIVABLES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 77,160 |  |  | $ | 35,898 |  |  | $ | 51,896 |  |  | $ | 209,601 |  |  | $ | 90,981 |  |  | $ | 19,292 |  |  | $ | — |  |  | $ | — |  |  | $ | 484,828 |
Ending balance: individually evaluated for impairment |  | $ | 310 |  |  | $ | — |  |  | $ | — |  |  | $ | 845 |  |  | $ | 2,990 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,145 |
Ending balance: collectively evaluated for impairment |  | $ | 76,850 |  |  | $ | 35,898 |  |  | $ | 51,896 |  |  | $ | 208,756 |  |  | $ | 87,991 |  |  | $ | 19,292 |  |  | $ | — |  |  | $ | — |  |  | $ | 480,683 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | 556 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 556 |
|  | Consumer Real Estate |  |  | Agriculture Real Estate |  |  | Agriculture |  |  | Commercial Real Estate |  |  | Commercial |  |  | Consumer (incl. Credit Cards) |  |  | Unfunded Loan Commitment & Letters of Credit |  |  | Unallocated |  |  | Total |
Three Months Ended March 31, 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ALLOWANCE FOR CREDIT LOSSES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 261 |  |  | $ | 140 |  |  | $ | 266 |  |  | $ | 2,088 |  |  | $ | 1,947 |  |  | $ | 315 |  |  | $ | 130 |  |  | $ | 74 |  |  | $ | 5,221 |
Charge Offs |  |  | (40 | ) |  |  | — |  |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | (86 | ) |  |  | — |  |  |  | — |  |  | $ | (126 | )
Recoveries |  |  | 3 |  |  |  | — |  |  |  | 7 |  |  |  | 4 |  |  |  | 15 |  |  |  | 30 |  |  |  | — |  |  |  | — |  |  | $ | 59 |
Provision |  |  | 209 |  |  |  | (51 | ) |  |  | (1 | ) |  |  | (522 | ) |  |  | (103 | ) |  |  | 34 |  |  |  | — |  |  |  | 562 |  |  | $ | 128 |
Other Non-interest expense related to unfunded |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10 |  |  |  | — |  |  | $ | 10 |
Ending Balance |  | $ | 433 |  |  | $ | 89 |  |  | $ | 272 |  |  | $ | 1,570 |  |  | $ | 1,859 |  |  | $ | 293 |  |  | $ | 140 |  |  | $ | 636 |  |  | $ | 5,292 |
Ending balance: individually evaluated for impairment |  | $ | 65 |  |  | $ | — |  |  | $ | — |  |  | $ | 22 |  |  | $ | 104 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 191 |
Ending balance: collectively evaluated for impairment |  | $ | 368 |  |  | $ | 89 |  |  | $ | 272 |  |  | $ | 1,548 |  |  | $ | 1,755 |  |  | $ | 293 |  |  | $ | 140 |  |  | $ | 636 |  |  | $ | 5,101 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2 |
FINANCING RECEIVABLES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 79,716 |  |  | $ | 31,814 |  |  | $ | 54,084 |  |  | $ | 200,865 |  |  | $ | 105,111 |  |  | $ | 21,652 |  |  | $ | — |  |  | $ | — |  |  | $ | 493,242 |
Ending balance: individually evaluated for impairment |  | $ | 467 |  |  | $ | — |  |  | $ | — |  |  | $ | 903 |  |  | $ | 493 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,867 |
Ending balance: collectively evaluated for impairment |  | $ | 79,249 |  |  | $ | 31,814 |  |  | $ | 54,084 |  |  | $ | 199,962 |  |  | $ | 104,618 |  |  | $ | 21,648 |  |  | $ | — |  |  | $ | — |  |  | $ | 491,375 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | 709 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 709 |

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(k)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 3, 4 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7512638&loc=d3e5074-111524 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=7512638&loc=d3e5162-111524 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.3,4) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph k -Article 4 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 01-6 -Paragraph 13 -Subparagraph d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7512638&loc=d3e5066-111524 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 7 -Article 9 + Details
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