The allowance for loan and lease losses is maintained at a level estimated by management to provide adequately for risk of probable losses inherent in the current loan and lease portfolio. The adequacy of the allowance for loan and lease losses is continuously monitored. It is assessed for adequacy using a methodology designed to ensure the level of the allowance reasonably reflects the loan and lease portfolio's risk profile. It is evaluated to ensure that it is sufficient to absorb all reasonably estimable credit losses inherent in the current loan and lease portfolio.

To develop and document a systematic methodology for determining the allowance for loan and lease losses, the Company has divided the loan portfolio into three portfolio segments, each with different risk characteristics and methodologies for assessing risk. Each portfolio segment is broken down into class segments where appropriate. Class segments contain unique measurement attributes, risk characteristics and methods for monitoring and assessing risk that are necessary to develop the allowance for loan and lease losses. Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class segment. The following table illustrates the portfolio and class segments for the Company's loan portfolio:

Commercial - The Company offers a variety of loan options to meet the specific needs of our commercial customers including term loans, time notes and lines of credit. Such loans are made available to businesses for working capital such as inventory and receivables, business expansion and equipment purchases. Generally, a collateral lien is placed on equipment or other assets owned by the borrower. These loans carry a higher risk than commercial real estate loans due to the nature of the underlying collateral, which can be business assets such as equipment and accounts receivable and is generally less liquid than real estate. To reduce the risk, management also attempts to secure real estate as collateral and obtain personal guarantees of the borrowers.

Commercial Real Estate - The Company offers commercial real estate loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties. Commercial real estate loans are made to finance the purchases of real property which generally consists of real estate with completed structures. These commercial real estate loans are secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, healthcare facilities, and other non owner-occupied facilities. These loans are typically less risky than commercial loans, since they are secured by real estate and buildings. The Company's underwriting analysis includes credit verification, independent appraisals, a review of the borrower's financial condition, and a detailed analysis of the borrower's underlying cash flows. These loans are typically originated in amounts of no more than 80% of the appraised value of the property.

Agricultural - The Company offers a variety of agricultural loans to meet the needs of our agricultural customers including term loans, time notes, and lines of credit. These loans are made to purchase livestock, purchase and modernize equipment, and finance seasonal crop expenses. Generally, a collateral lien is placed on the livestock, equipment, produce inventories, and/or receivables owned by the borrower. These loans may carry a higher risk than commercial and agricultural real estate loans due to the industry price volatility, and in some cases, the perishable nature of the underlying collateral. To reduce these risks, management may attempt to secure these loans with additional real estate collateral, obtain personal guarantees of the borrowers, or obtain government loan guarantees to provide further support.

Agricultural Real Estate - The Company offers real estate loans to our agricultural customers to finance farm related real estate purchases, refinancings, expansions, and improvements to agricultural properties such as barns, production facilities, and land. The agricultural real estate loans are secured by first liens on the farm real estate. Because they are secured by land and buildings, these loans may be less risky than agricultural loans. The Company's underwriting analysis includes credit verification, independent appraisals, a review of the borrower's financial condition, and a detailed analysis of the borrower's underlying cash flows. These loans are typically originated in amounts of no more than 75% of the appraised value of the property. Government loan guarantees may be obtained to provide further support.

Small Business - The Company offers a variety of loan options to meet the specific needs of our small business customers including term loans, small business mortgages and lines of credit. Such loans are generally less than $350 thousand and are made available to businesses for working capital such as inventory and receivables, business expansion, equipment purchases, and agricultural needs. Generally, a collateral lien is placed on equipment or other assets owned by the borrower such as inventory and/or receivables. These loans carry a higher risk than commercial loans due to the smaller size of the borrower and lower levels of capital. To reduce the risk, the Company obtains personal guarantees of the owners for a majority of the loans.

Indirect - The Company maintains relationships with many dealers primarily in the communities that we serve. Through these relationships, the company finances the purchases of automobiles and recreational vehicles (such as campers, boats, etc.) indirectly through dealer relationships. Approximately 69% of the indirect relationships represent automobile financing. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from three to six years, based upon the nature of the collateral and the size of the loan. The majority of indirect consumer loans are underwritten on a secured basis using the underlying collateral being financed.

Home Equity - The Company offers fixed home equity loans as well as home equity lines of credit to consumers to finance home improvements, debt consolidation, education and other uses. Consumers are able to borrower up to 85% of the equity in their homes. The Company originates home equity lines of credit and second mortgage loans (loans secured by a second [junior] lien position on one-to-four-family residential real estate). These loans carry a higher risk than first mortgage residential loans as they are in a second position with respect to collateral. Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate.

Direct - The Company offers a variety of consumer installment loans to finance vehicle purchases, mobile home purchases and personal expenditures. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from one to ten years, based upon the nature of the collateral and the size of the loan. The majority of consumer loans are underwritten on a secured basis using the underlying collateral being financed or a customer's deposit account. In addition to installment loans, the Company also offers personal lines of credit and overdraft protection. A minimal amount of loans are unsecured, which carry a higher risk of loss.

Residential Real Estate - Residential real estate loans consist primarily of loans secured by first or second deeds of trust on primary residences. We originate adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a mortgage. These loans are collateralized by owner-occupied properties located in the Company's market area. When market conditions are favorable, for longer term, fixed-rate residential mortgages without escrow, the Company retains the servicing, but sells the right to receive principal and interest to Freddie Mac. This practice allows the Company to manage interest rate risk, liquidity risk, and credit risk. Loans on one-to-four-family residential real estate are generally originated in amounts of no more than 85% of the purchase price or appraised value (whichever is lower), or have private mortgage insurance. Mortgage title insurance and hazard insurance are normally required. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic site inspections, including one at each loan draw period.

For purposes of evaluating the adequacy of the allowance, the Company considers a number of significant factors that affect the collectibility of the portfolio. For individually analyzed loans, these include estimates of loss exposure, which reflect the facts and circumstances that affect the likelihood of repayment of such loans as of the evaluation date. For homogeneous pools of loans and leases, estimates of the Company's exposure to credit loss reflect a current assessment of a number of factors, which could affect collectibility. These factors include: past loss experience; size, trend, composition, and nature of loans; changes in lending policies and procedures, including underwriting standards and collection, charge-offs and recoveries; trends experienced in nonperforming and delinquent loans; current economic conditions in the Company's market; portfolio concentrations that may affect loss experienced across one or more components of the portfolio; the effect of external factors such as competition, legal and regulatory requirements; and the experience, ability, and depth of lending management and staff. In addition, various regulatory agencies, as an integral component of their examination process, periodically review the Company's allowance for loan and lease losses. Such agencies may require the Company to make loan grade changes as well as recognize additions to the allowance based on their examinations.

After a thorough consideration of the factors discussed above, any required additions or reductions to the allowance for loan and lease losses are made periodically by charges or credits to the provision for loan and lease losses. These charges or credits are necessary to maintain the allowance at a level which management believes is reasonably reflective of overall inherent risk of probable loss in the portfolio. While management uses available information to recognize losses on loans and leases, additions and reductions of the allowance may fluctuate from one reporting period to another. These fluctuations are reflective of changes in risk associated with portfolio content and/or changes in management's assessment of any or all of the determining factors discussed above. The following table illustrates the changes in the allowance for loan and lease losses by portfolio segment for the three and six months ended June 30, 2011 and June 30, 2010:

Allowance for Loan and Lease Losses
(in thousands)

Three months ended June 30			Residential
	Commercial	Consumer	Real Estate
	Loans	Loans	Mortgages	Unallocated	Total
Balance as of March 31, 2011	$ 37,937	$ 26,219	$ 5,338	$ 440	$ 69,934
Charge-offs	(2,588)	(3,600)	(414)	-	(6,602)
Recoveries	474	654	3	-	1,131
Provision	3,324	2,445	446	(194)	6,021
Ending Balance as of June 30, 2011	$ 39,147	$ 25,718	$ 5,373	$ 246	$ 70,484

Balance as of March 31, 2010	$ 41,249	$ 25,809	$ 2,838	$ 254	$ 70,150
Charge-offs	(3,311)	(3,982)	(410)	-	(7,703)
Recoveries	711	791	1	-	1,503
Provision	236	5,214	866	34	6,350
Ending Balance as of June 30, 2010	$ 38,885	$ 27,832	$ 3,295	$ 288	$ 70,300


Six months ended June 30			Residential
	Commercial	Consumer	Real Estate
	Loans	Loans	Mortgages	Unallocated	Total
Balance as of December 31, 2010	$ 40,101	$ 26,126	$ 4,627	$ 380	$ 71,234
Charge-offs	(5,458)	(6,893)	(513)	-	(12,864)
Recoveries	894	1,230	4	-	2,128
Provision	3,610	5,255	1,255	(134)	9,986
Ending Balance as of June 30, 2011	$ 39,147	$ 25,718	$ 5,373	$ 246	$ 70,484

Balance as of December 31, 2009	$ 36,598	$ 26,664	$ 3,002	$ 286	$ 66,550
Charge-offs	(6,141)	(7,925)	(522)	-	(14,588)
Recoveries	1,236	1,502	7	-	2,745
Provision	7,192	7,591	808	2	15,593
Ending Balance as of June 30, 2010	$ 38,885	$ 27,832	$ 3,295	$ 288	$ 70,300

Allowance for Loan and Lease Losses and Recorded Investment in Loans and Leases
(in thousands)

			Residential
	Commercial	Consumer	Real Estate
	Loans	Loans	Mortgages	Unallocated	Total
As of June 30, 2011
Allowance loan and lease losses	$ 39,147	$ 25,718	$ 5,373	$ 246	$ 70,484

Allowance for loans and leases individually evaluated for impairment	$ 352	$ -	$ -		$ 352

Allowance for loans and leases collectively evaluated for impairment	$ 38,795	$ 25,718	$ 5,373	$ 246	$ 70,132


Ending balance of loans and leases	$ 1,631,097	$ 1,469,075	$ 564,345		$ 3,664,517

Ending balance of loans and leases individually evaluated for impairment	$ 7,718	$ -	$ -		$ 7,718

Ending balance of loans and leases collectively evaluated for impairment	$ 1,623,379	$ 1,469,075	$ 564,345		$ 3,656,799


As of December 31, 2010
Allowance loan and lease losses	$ 40,101	$ 26,126	$ 4,627	$ 380	$ 71,234

Allowance for loans and leases individually evaluated for impairment	$ 2,211	$ -	$ -		$ 2,211

Allowance for loans and leases collectively evaluated for impairment	$ 37,890	$ 26,126	$ 4,627	$ 380	$ 69,023


Ending balance of loans and leases	$ 1,580,371	$ 1,481,241	$ 548,394		$ 3,610,006

Ending balance of loans and leases individually evaluated for impairment	$ 11,419	$ -	$ -		$ 11,419

Ending balance of loans and leases collectively evaluated for impairment	$ 1,568,952	$ 1,481,241	$ 548,394		$ 3,598,587

Loans and leases are placed on nonaccrual status when timely collection of principal and interest in accordance with contractual terms is doubtful. Loans and leases are transferred to nonaccrual status generally when principal or interest payments become ninety days delinquent, unless the loan is well secured and in the process of collection, or sooner when management concludes or circumstances indicate that borrowers may be unable to meet contractual principal or interest payments. When a loan or lease is transferred to a nonaccrual status, all interest previously accrued in the current period but not collected is reversed against interest income in that period. Interest accrued in a prior period and not collected is charged-off against the allowance for loan and lease losses. The Company's nonaccrual policies are the same for all classes of financing receivable.

If ultimate repayment of a nonaccrual loan is expected, any payments received are applied in accordance with contractual terms. If ultimate repayment of principal is not expected, any payment received on a nonaccrual loan is applied to principal until ultimate repayment becomes expected. Nonaccrual loans are returned to accrual status when they become current as to principal and interest and demonstrate a period of performance under the contractual terms and, in the opinion of management, are fully collectible as to principal and interest. When in the opinion of management the collection of principal appears unlikely, the loan balance is charged-off in total or in part. For loans in all portfolios, the principal amount is charged off in full or in part as soon as management determines, based on available facts, that the collection of principal in full is improbable. For commercial loans, management considers specific facts and circumstances relative to individual credits in making such a determination. For consumer and residential loan classes, management uses specific guidance and thresholds from the Federal Financial Institutions Examination Council's Uniform Retail Credit Classification and Account Management Policy.

Loans on Nonaccrual Status

(In thousands)		June 30, 2011	December 31, 2010
Commercial Loans
	Commercial	$ 2,424	$ 5,837
	Commercial Real Estate	5,871	5,687
	Agricultural	3,706	4,065
	Agricultural Real Estate	1,886	2,429
	Small Business	7,695	7,033
		21,582	25,051

Consumer Loans
	Indirect	1,185	1,971
	Home Equity	8,046	6,395
	Direct	410	399
		9,641	8,765

Residential Real Estate Mortgages		8,968	8,651

Total Nonaccrual		$ 40,191	$ 42,467

Age Analysis of Past Due Loans
As of June 30, 2011
(in thousands)

				Greater Than				Recorded
		31-60 Days	61-90 Days	90 Days	Total			Total
		Past Due	Past Due	Past Due	Past Due			Loans and
		Accruing	Accruing	Accruing	Accruing	Non-Accrual	Current	Leases
Commercial Loans
	Commercial	$ 203	$ 401	$ -	$ 604	$ 2,424	$ 518,065	$ 521,093
	Commercial Real Estate	2,075	1,739	-	3,814	5,871	740,617	750,302
	Agricultural	-	3	-	3	3,706	62,131	65,840
	Agricultural Real Estate	161	-	-	161	1,886	32,391	34,438
	Small Business	1,479	310	-	1,789	7,695	249,940	259,424
		3,918	2,453	-	6,371	21,582	1,603,144	1,631,097

Consumer Loans
	Indirect	7,248	1,542	893	9,683	1,185	826,337	837,205
	Home Equity	4,717	1,169	273	6,159	8,046	543,894	558,099
	Direct	741	254	107	1,102	410	72,259	73,771
		12,706	2,965	1,273	16,944	9,641	1,442,490	1,469,075

Residential Real Estate Mortgages		1,507	391	186	2,084	8,968	553,293	564,345
		$ 18,131	$ 5,809	$ 1,459	$ 25,399	$ 40,191	$3,598,927	$3,664,517

Age Analysis of Past Due Loans
As of December 31, 2010
(in thousands)

					Greater Than					Recorded
		31-60 Days		61-90 Days	91 Days	Total				Total
		Past Due		Past Due	Past Due	Past Due				Loans and
		Accruing		Accruing	Accruing	Accruing	Non-Accrual	Current		Leases
Commercial
	Commercial		$ 136	$ 55	$ 94	$ 285	$ 5,837	$ 461,633		$ 467,755
	Commercial
	Real Estate		1,263	-	-	1,263	5,687	730,285		737,235
	Agricultural		63	92	-	155	4,065	63,336		67,556
	Agricultural
	Real Estate		108	-	-	108	2,429	33,400		35,937
	Small Business		2,570	1,183	-	3,753	7,033	261,102		271,888
			4,140	1,330	94	5,564	25,051	1,549,756		1,580,371

Consumer
	Indirect		9,307	2,193	862	12,362	1,971	814,594		828,927
	Home Equity		5,740	1,756	396	7,892	6,395	561,391		575,678
	Direct		927	158	54	1,139	399	75,098		76,636
			15,974	4,107	1,312	21,393	8,765	1,451,083		1,481,241

Residential Real Estate Mortgages			3,002	126	919	4,047	8,651		535,696		548,394
		$ 23,116		$ 5,563	$ 2,325	$ 31,004	$ 42,467	$ 3,536,535		$ 3,610,006

The methodology used to establish the allowance for loan and lease losses on impaired loans incorporates specific allocations on loans analyzed individually. Classified loans with outstanding balances of $500 thousand or more are evaluated for impairment through the Company's quarterly status review process. In determining that we will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreements, we consider factors such as payment history and changes in the financial condition of individual borrowers, local economic conditions, historical loss experience and the conditions of the various markets in which the collateral may be liquidated. For loans that are impaired as defined by accounting standards, impairment is measured by one of three methods: 1) the fair value of collateral less cost to sell, 2) present value of expected future cash flows or 3) the loan's observable market price. All impaired loans are reviewed on a quarterly basis for changes in the measurement of impairment. For impaired loans measured using the present value of expected cash flow method, any change to the previously recognized impairment loss is recognized as a change to the allowance account and recorded in the consolidated statement of income as a component of the provision for credit losses. At June 30, 2011, $2.8 million of the total impaired loans had a specific reserve allocation of $0.4 million compared to $5.7 million of impaired loans at December 31, 2010 which had a specific reserve allocation of $2.2 million.

Impaired Loans
			June 30, 2011			December 31, 2010
			Recorded	Unpaid		Recorded	Unpaid
			Investment	Principal		Investment	Principal
			Balance	Balance	Related	Balance	Balance	Related
(in thousands)			(Book)	(Legal)	Allowance	(Book)	(Legal)	Allowance
With no related allowance recorded:
	Commercial Loans
		Commercial	$ 2,746	$ 5,956		$ 1,794	$ 2,145
		Commercial Real Estate	4,464	7,116		3,787	4,467
		Agricultural	2,451	3,009		2,657	3,145
		Agricultural Real Estate	1,606	2,242		1,283	1,382
		Small Business	7,552	10,712		1,982	2,334
			$ 18,819	$ 29,035		$ 11,503	$ 13,473

With an allowance recorded:
	Commercial Loans
		Commercial	$ 553	$ 868	$ 275	$ 3,925	$ 4,962	$ 1,907
		Commercial Real Estate	-	-	-	-	-	-
		Agricultural	1,508	1,866	74	1,671	1,918	281
		Agricultural Real Estate	702	777	3	728	784	23
			2,763	3,511	352	6,324	7,664	2,211

Total:			$ 21,582	$ 32,546	$ 352	$ 17,827	$ 21,137	$ 2,211

			June 30, 2011			June 30, 2010
			Average	Interest Income		Average	Interest Income
			Recorded	Recognized		Recorded	Recognized
(in thousands)			Investment	Accrual	Cash	Investment	Accrual	Cash
With no related allowance recorded:
	Commercial Loans
		Commercial	$ 3,349	$ 26	$ 26	$ 1,754	$ 24	$ 24
		Commercial Real Estate	4,315	24	24	3,401	5	5
		Agricultural	2,485	18	18	2,770	16	16
		Agricultural Real Estate	1,720	21	21	2,652	35	35
		Small Business	7,930	89	89	5,337	46	46
			$ 19,799	$ 178	$178	$ 15,914	$ 126	$126

With an allowance recorded:
	Commercial Loans
		Commercial	$ 558	$ 19	$ 19	$ 2,308	$ -	$ -
		Commercial Real Estate	-	-	-	2,373	-	-
		Agricultural	1,521	67	67	1,847	46	46
		Agricultural Real Estate	706	13	13	767	13	13
			$ 2,785	$ 99	$ 99	$ 7,295	$ 59	$ 59

Total:			$ 22,584	$ 277	$277	$ 23,209	$ 185	$185

			June 30, 2011			June 30, 2010
			Average	Interest Income		Average	Interest Income
			Recorded	Recognized		Recorded	Recognized
(in thousands)			Investment	Accrual	Cash	Investment	Accrual	Cash
With no related allowance recorded:
	Commercial Loans
		Commercial	$ 3,041	$ 73	$ 73	$ 1,813	$ 29	$ 29
		Commercial Real Estate	4,039	45	45	3,785	14	14
		Agricultural	2,597	45	45	2,515	28	28
		Agricultural Real Estate	1,496	38	38	2,311	64	64
		Small Business	4,666	102	102	2,995	47	47
			$ 15,839	$ 303	$303	$ 13,419	$ 182	$182

With an allowance recorded:
	Commercial Loans
		Commercial	$ 1,226	$ 49	$ 49	$ 2,477	$ 1	$ 1
		Commercial Real Estate	573	-	-	2,107	-	-
		Agricultural	1,571	67	67	1,886	58	58
		Agricultural Real Estate	713	18	18	775	42	42
			$ 4,083	$ 134	$134	$ 7,245	$ 101	$101

Total:			$ 19,922	$ 437	$437	$ 20,664	$ 283	$283

There has been significant disruption and volatility in the financial and capital markets since the second half of 2008. Turmoil in the mortgage industry adversely impacted both domestic and global economies and led to a significant credit and liquidity crisis in many domestic markets. These conditions were attributable to a variety of factors, in particular the fallout associated with subprime mortgage loans (a type of lending we have never actively pursued). The disruption was exacerbated by the decline of the real estate and housing market. However, in the markets in which the Company does business, the disruption has been somewhat delayed and less significant than in the national market. For example, our real estate market has not suffered the extreme declines seen nationally and our unemployment rate, while notably higher than in prior periods, is still below the national average.

While we continue to adhere to prudent underwriting standards, as a lender we may be adversely impacted by general economic weaknesses and, in particular, a sharp downturn in the housing market nationally. Decreases in real estate values could adversely affect the value of property used as collateral for our loans. Adverse changes in the economy may have a negative effect on the ability of our borrowers to make timely loan payments, which would have an adverse impact on our earnings. An adverse impact on loan delinquencies would decrease our net interest income and adversely impact our loan loss experience, causing increases in our provision and allowance for loan and lease losses.

The Company has developed an internal loan grading system to evaluate and quantify the Bank's loan portfolio with respect to quality and risk. The system focuses on, among other things, financial strength of borrowers, experience and depth of borrower's management, primary and secondary sources of repayment, payment history, nature of the business, and outlook on particular industries. The internal grading system enables the Company to monitor the quality of the entire loan portfolio on a consistent basis and provide management with an early warning system, enabling recognition and response to problem loans and potential problem loans.

For commercial and agricultural loans, the Company uses a grading system that relies on quantifiable and measurable characteristics when available. This would include comparison of financial strength to available industry averages, comparison of transaction factors (loan terms and conditions) to loan policy, and comparison of credit history to stated repayment terms and industry averages. Some grading factors are necessarily more subjective such as economic and industry factors, regulatory environment, and management. Classified commercial loans consist of loans graded substandard and below. All classified loans with outstanding balances of $500 thousand or more are evaluated individually for impairment through the quarterly review process. The grading system for commercial and agricultural loans is as follows:

A doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as a loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information. Nonaccrual treatment is required for doubtful assets because of the high probability of loss.

Substandard loans have a high probability of payment default, or they have other well-defined weaknesses. They require more intensive supervision by bank management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some Substandard loans, the likelihood of full collection of interest and principal may be in doubt and should be placed on nonaccrual. Although Substandard assets in the aggregate will have a distinct potential for loss, an individual asset's loss potential does not have to be distinct for the asset to be rated Substandard.

Special Mention loans have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company's position at some future date. These loans pose elevated risk, but their weakness does not yet justify a Substandard classification. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or may be struggling with an ill-proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a Special Mention rating. Although a Special Mention loan has a higher probability of default than a pass asset, its default is not imminent.

Classified loans are inadequately protected by the current worth and paying capacity of the obligor or, if applicable, the collateral pledged. These loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt, or in some cases make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Classified loans have a high probability of payment default, or a high probability of total or substantial loss. These loans require more intensive supervision by management and are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. When the likelihood of full collection of interest and principal may be in doubt; classified loans are considered to have a nonaccrual status. In some cases, Classified loans are considered uncollectible and of such little value that their continuance as assets is not warranted.

Credit Quality Indicators
As of June 30, 2011


Commercial Credit Exposure			Commercial		Agricultural
By Internally Assigned Grade:		Commercial	Real Estate	Agricultural	Real Estate	Total
	1 - Pass	$ 487,398	$ 658,469	$ 57,263	$ 29,415	$ 1,232,545
	2 - Special Mention	6,175	35,810	366	463	42,814
	3 - Substandard	26,967	56,023	8,128	4,560	95,678
	4 - Doubtful	553	-	83	-	636
Total		$ 521,093	$ 750,302	$ 65,840	$ 34,438	$ 1,371,673

Small Business Credit Exposure
By Internally Assigned Grade:		Small Business				Total
	Non-classified	$ 241,417				$ 241,417
	Classified	18,007				18,007
Total		$ 259,424				$ 259,424

Consumer Credit Exposure
By Payment Activity:		Indirect	Home Equity	Direct		Total
	Performing	$ 835,127	$ 549,780	$ 73,254		$ 1,458,161
	Nonperforming	2,078	8,319	517		10,914
Total		$ 837,205	$ 558,099	$ 73,771		$ 1,469,075

Residential Mortgage Credit Exposure		Residential
By Payment Activity:		Mortgage				Total
	Performing	$ 555,191				$ 555,191
	Nonperforming	9,154				9,154
Total		$ 564,345				$ 564,345

Credit Quality Indicators
As of December 31, 2010

Commercial Credit Exposure			Commercial		Agricultural
By Internally Assigned Grade:		Commercial	Real Estate	Agricultural	Real Estate	Total
	1 - Pass	$ 441,834	$ 654,974	$ 61,195	$ 30,483	$1,188,486
	2 - Special Mention	4,830	35,461	660	936	41,887
	3 - Substandard	21,091	46,800	5,606	4,518	78,015
	4 - Doubtful	-	-	95	-	95
Total		$ 467,755	$ 737,235	$ 67,556	$ 35,937	$1,308,483

Small Business Credit Exposure
By Internally Assigned Grade:		Small Business				Total
	Non-classified	$ 253,120				$ 253,120
	Classified	18,768				18,768
Total		$ 271,888				$ 271,888

Consumer Credit Exposure
By Payment Activity:		Indirect	Home Equity	Direct		Total
	Performing	$ 826,956	$ 569,283	$ 76,237		$1,472,476
	Nonperforming	1,971	6,395	399		8,765
Total		$ 828,927	$ 575,678	$ 76,636		$1,481,241

Residential Mortgage Credit Exposure		Residential
By Payment Activity:		Mortgage				Total
	Performing	$ 539,743				$ 539,743
	Nonperforming	8,651				8,651
Total		$ 548,394				$ 548,394