Accounting for Certain Loans Acquired in a Purchase

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Accounting for Certain Loans Acquired in a Purchase

ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A PURCHASE

The Bank acquired loans in a purchase during the year ended December 31, 2012. The following table includes the carrying amount of these loans, which are included in the balance sheet amounts of loans receivable at June 30, 2013 and December 31, 2012.

	June 30, 2013		December 31, 2012
Commercial and industrial loans	$	5,408	$	8,542
Agricultural production financing and other loans to farmers	872		1,127
Real estate loans:
Construction			58
Commercial and farmland	21,129		24,259
Residential	10,415		12,118
Home Equity	17,509		18,805
Individuals' loans for household and other personal expenditures	464		691
Other Loans	169
Total	$	55,966	$	65,600

Accretable yield, or income expected to be collected, is as follows:

	Three Months Ended June 30, 2013			Six Months Ended June 30, 2013
Beginning balance	$	4,371		$	5,142
Accretion	(412		)	(1,183		)
Ending balance, June 30, 2013	$	3,959		$	3,959

	Three Months Ended June 30, 2012			Six Months Ended June 30, 2012
Beginning balance, February 10, 2012	$	9,774		$	9,774
Accretion	(726		)	(726		)
Ending balance, June 30, 2012	$	9,048		$	9,048

At acquisition, certain purchased loans evidenced deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information

such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition, which incorporated the estimate of current key assumptions, such as default rates, severity and prepayment speeds.