Note 4 - Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 4:    LOANS AND ALLOWANCE FOR LOAN LOSSES

At June 30, 2013, the Company’s loan portfolio was $1.88 billion, compared to $1.92 billion at December 31, 2012.  The various categories of loans are summarized as follows:

(In thousands)	June 30, 2013		December 31, 2012
Consumer:
Credit cards	$	173,536	$	185,536
Student loans		30,106		34,145
Other consumer		103,765		105,319
Total consumer		307,407		325,000
Real Estate:
Construction		142,902		138,132
Single family residential		364,239		356,907
Other commercial		572,110		568,166
Total real estate		1,079,251		1,063,205
Commercial:
Commercial		152,122		141,336
Agricultural		107,113		93,805
Total commercial		259,235		235,141
Other		4,502		5,167
Loans		1,650,395		1,628,513
Loans acquired, covered by FDIC loss share (net of discount)		163,736		210,842
Loans acquired, not covered by FDIC loss share (net of discount)		63,500		82,764
Total loans before allowance for loan losses	$	1,877,631	$	1,922,119

Loan Origination/Risk Management – The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral; obtaining and monitoring collateral; providing an adequate allowance for loans losses by regularly reviewing loans through the internal loan review process.  The loan portfolio is diversified by borrower, purpose and industry.  The Company seeks to use diversification within the loan portfolio to reduce its credit risk, thereby minimizing the adverse impact on the portfolio, if weaknesses develop in either the economy or a particular segment of borrowers.  Collateral requirements are based on credit assessments of borrowers and may be used to recover the debt in case of default.

Consumer – The consumer loan portfolio consists of credit card loans, student loans and other consumer loans.  The Company no longer originates student loans, and the current portfolio is guaranteed by the Department of Education at 97% of principal and interest.  Credit card loans are diversified by geographic region to reduce credit risk and minimize any adverse impact on the portfolio. Although they are regularly reviewed to facilitate the identification and monitoring of creditworthiness, credit card loans are unsecured loans, making them more susceptible to be impacted by economic downturns resulting in increasing unemployment.  Other consumer loans include direct and indirect installment loans and overdrafts.  Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

Real estate – The real estate loan portfolio consists of construction loans, single family residential loans and commercial loans.  Construction and development loans (“C&D”) and commercial real estate loans (“CRE”) can be particularly sensitive to valuation of real estate.  Commercial real estate cycles are inevitable.  The long planning and production process for new properties and rapid shifts in business conditions and employment create an inherent tension between supply and demand for commercial properties.  While general economic trends often move individual markets in the same direction over time, the timing and magnitude of changes are determined by other forces unique to each market.  CRE cycles tend to be local in nature and longer than other credit cycles.  Factors influencing the CRE market are traditionally different from those affecting residential real estate markets; thereby making predictions for one market based on the other difficult.  Additionally, submarkets within commercial real estate – such as office, industrial, apartment, retail and hotel – also experience different cycles, providing an opportunity to lower the overall risk through diversification across types of CRE loans.  Management realizes that local demand and supply conditions will also mean that different geographic areas will experience cycles of different amplitude and length.  The Company monitors these loans closely and has no significant concentrations in its real estate loan portfolio.

Commercial – The commercial loan portfolio includes commercial and agricultural loans, representing loans to commercial customers and farmers for use in normal business or farming operations to finance working capital needs, equipment purchase or other expansion projects.  Collection risk in this portfolio is driven by the creditworthiness of the underlying borrowers, particularly cash flow from customers??business or farming operations.  The Company continues its efforts to keep loan terms short, reducing the potential negative impact of upward movement in interest rates.  Term loans are generally set up with a one or three year balloon, and the Company has recently instituted a pricing mechanism for commercial loans.  It is standard practice to require personal guaranties on all commercial loans, particularly as they relate to closely-held or limited liability entities.

Nonaccrual and Past Due Loans – Loans are considered past due if the required principal and interest payments have not been received as of 30 days from the date such payments were due.  Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions.  Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.  When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Nonaccrual loans, excluding loans acquired, segregated by class of loans, are as follows:

(In thousands)	June 30, 2013		December 31, 2012
Consumer:
Credit cards	$	334	$	281
Other consumer		828		801
Total consumer		1,162		1,082
Real estate:
Construction		110		463
Single family residential		2,069		2,706
Other commercial		2,396		4,254
Total real estate		4,575		7,423
Commercial:
Commercial		439		471
Agricultural		87		147
Total commercial		526		618
Total	$	6,263	$	9,123

An age analysis of past due loans, excluding loans acquired, segregated by class of loans, is as follows:

(In thousands)	Gross 30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due & Accruing
June 30, 2013
Consumer:
Credit cards	$	613	$	507	$	1,120	$	172,416	$	173,536	$	172
Student loans		1,031		2,254		3,285		26,821		30,106		2,254
Other consumer		923		531		1,454		102,311		103,765		127
Total consumer		2,567		3,292		5,859		301,548		307,407		2,553
Real estate:
Construction		22		44		66		142,836		142,902		26
Single family residential		2,157		1,412		3,569		360,670		364,239		439
Other commercial		476		2,336		2,812		569,298		572,110		--
Total real estate		2,655		3,792		6,447		1,072,804		1,079,251		465
Commercial:
Commercial		478		346		824		151,298		152,122		115
Agricultural		126		58		184		106,929		107,113		--
Total commercial		604		404		1,008		258,227		259,235		115
Other		--		--		--		4,502		4,502		--
Total	$	5,826	$	7,488	$	13,314	$	1,637,081	$	1,650,395	$	3,133
December 31, 2012
Consumer:
Credit cards	$	710	$	547	$	1,257	$	184,279	$	185,536	$	266
Student loans		901		2,234		3,135		31,010		34,145		2,234
Other consumer		1,149		529		1,678		103,641		105,319		204
Total consumer		2,760		3,310		6,070		318,930		325,000		2,704
Real estate:
Construction		309		365		674		137,458		138,132		--
Single family residential		3,069		1,539		4,608		352,299		356,907		137
Other commercial		716		3,303		4,019		564,147		568,166		--
Total real estate		4,094		5,207		9,301		1,053,904		1,063,205		137
Commercial:
Commercial		340		385		725		140,611		141,336		74
Agricultural		81		113		194		93,611		93,805		--
Total commercial		421		498		919		234,222		235,141		74
Other		--		--		--		5,167		5,167		--
Total	$	7,275	$	9,015	$	16,290	$	1,612,223	$	1,628,513	$	2,915

Impaired Loans – A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loans, including scheduled principal and interest payments.  This includes loans that are delinquent 90 days or more, nonaccrual loans and certain other loans identified by management.   Impaired loans are carried at the present value of estimated future cash flows using the loan’s existing rate, or the fair value of the collateral if the loan is collateral dependent. 

Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans.  Impaired loans, or portions thereof, are charged-off when deemed uncollectible.

Impaired loans, net of government guarantees and excluding loans acquired, segregated by class of loans, are as follows:

(In thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
June 30, 2013											Three Months Ended June 30, 2013				Six Months Ended June 30, 2013
Consumer:
Credit cards	$	507	$	507	$	--	$	507	$	76	$	501	$	3	$	516	$	8
Other consumer		1,030		928		92		1,020		196		1,026		10		1,061		22
Total consumer		1,537		1,435		92		1,527		272		1,527		13		1,577		30
Real estate:
Construction		3,272		2,052		1,177		3,229		419		3,350		34		4,020		84
Single family residential		3,145		2,130		1,015		3,145		533		3,744		37		3,835		80
Other commercial		9,285		5,183		2,881		8,064		557		11,827		118		14,212		295
Total real estate		15,702		9,365		5,073		14,438		1,509		18,921		189		22,067		459
Commercial:
Commercial		724		458		149		607		105		664		7		669		14
Agricultural		87		87		--		87		9		90		1		90		2
Total commercial		811		545		149		694		114		754		8		759		16
Total	$	18,050	$	11,345	$	5,314	$	16,659	$	1,895	$	21,201	$	210	$	24,403	$	505

December 31, 2012											Three Months Ended June 30, 2012				Six Months Ended June 30, 2012
Consumer:
Credit cards	$	547	$	547	$	--	$	547	$	82	$	540	$	4	$	562	$	8
Other consumer		1,140		999		131		1,130		249		1,145		14		1,206		30
Total consumer		1,687		1,546		131		1,677		331		1,685		18		1,768		38
Real estate:
Construction		5,443		3,866		1,494		5,360		505		5,628		71		5,512		138
Single family residential		4,091		2,877		1,140		4,017		494		3,803		48		4,146		104
Other commercial		21,199		5,903		13,078		18,981		1,310		22,402		283		23,850		596
Total real estate		30,733		12,646		15,712		28,358		2,309		31,833		402		33,508		838
Commercial:
Commercial		842		487		191		678		179		751		10		794		20
Agricultural		236		74		16		90		24		247		3		310		8
Total commercial		1,078		561		207		768		203		998		13		1,104		28
Total	$	33,498	$	14,753	$	16,050	$	30,803	$	2,843	$	34,516	$	433	$	36,380	$	904

At June 30, 2013, and December 31, 2012, impaired loans, net of government guarantees and excluding loans acquired, totaled $16.7 million and $30.8 million, respectively.  Allocations of the allowance for loan losses relative to impaired loans were $1.9 million at June 30, 2013, and $2.8 million at December 31, 2012.  Approximately $210,000 and $505,000 of interest income was recognized on average impaired loans of $21.2 million and $24.4 million for the three and six months ended June 30, 2013.  Interest income recognized on impaired loans on a cash basis during the three and six months ended June 30, 2013 and 2012 was not material.

Included in certain impaired loan categories are troubled debt restructurings (“TDRs”).  When the Company restructures a loan to a borrower that is experiencing financial difficulty and grants a concession that it would not otherwise consider, a “troubled debt restructuring” results and the Company classifies the loan as a TDR.  The Company grants various types of concessions, primarily interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal.

Under ASC Topic 310-10-35 – Subsequent Measurement, a TDR is considered to be impaired, and an impairment analysis must be performed.  The Company assesses the exposure for each modification, either by collateral discounting or by calculation of the present value of future cash flows, and determines if a specific allocation to the allowance for loan losses is required.

Once an obligation has been restructured because of such credit problems, it continues to be considered a TDR until paid in full; or, if an obligation yields a market interest rate and no longer has any concession regarding payment amount or amortization, then it is not considered a TDR at the beginning of the calendar year after the year in which the improvement takes place.  The Company returns TDRs to accrual status only if (1) all contractual amounts due can reasonably be expected to be repaid within a prudent period, and (2) repayment has been in accordance with the contract for a sustained period, typically at least six months.

The following table presents a summary of troubled debt restructurings, excluding loans acquired, segregated by class of loans.

	Accruing TDR Loans				Nonaccrual TDR Loans				Total TDR Loans
(Dollars in thousands)	Number		Balance		Number		Balance		Number		Balance
June 30, 2013
Consumer:
Other consumer		1	$	33		--	$	--		1	$	33
Total consumer		1		33		--		--		1		33
Real estate:
Construction		1		988		--		--		1		988
Single-family residential		4		885		1		11		5		896
Other commercial		13		7,840		1		608		14		8,448
Total real estate		18		9,713		2		619		20		10,332
Commercial:
Commercial		2		76		1		85		3		161
Agriculture		1		652		--		--		1		652
Total commercial		3		728		1		85		4		813
Total		22	$	10,474		3	$	704		25	$	11,178
December 31, 2012
Consumer:
Other consumer		1	$	33		1	$	12		2	$	45
Total consumer		1		33		1		12		2		45
Real estate:
Construction		2		1,212		--		--		2		1,212
Single-family residential		3		570		1		15		4		585
Other commercial		14		8,508		4		2,962		18		11,470
Total real estate		19		10,290		5		2,977		24		13,267
Commercial:
Commercial		1		39		1		85		2		124
Agricultural		1		653		--		--		1		653
Total commercial		2		692		1		85		3		777
Total		22	$	11,015		7	$	3,074		29	$	14,089

The following table presents loans that were restructured as TDRs during the six months ended June 30, 2013 and 2012, excluding loans acquired, segregated by class of loans.

							Modification Type
(Dollars in thousands)	Number of Loans		Balance Prior to TDR		Balance at June 30		Change in Maturity Date		Change in Rate		Financial Impact on Date of Restructure
Six Months Ended June 30, 2013
Real estate:
Single-family residential		1		321		318		--		318		--
Total real estate		1		321		318		--		318		--
Total		1	$	321	$	318	$	--	$	318	$	--
Six Months Ended June 30, 2012
Consumer:
Other consumer		1	$	48	$	33	$	--	$	33	$	--
Total consumer		1		48		33		--		33		--
Real estate:
Other commercial		4		1,054		879		--		879		--
Total real estate		4		1,054		879		--		879		--
Commercial:
Commercial		1		50		39		--		39		--
Total commercial		1		50		39		--		39		--
Total		6	$	1,152	$	951	$	--	$	951	$	--

During the three months ended June 30, 2013, the Company did not modify any loans which were deemed troubled debt restructurings.  During the six months ended June 30, 2013, the Company modified one loan with a recorded investment of $321,000 prior to modification which was deemed troubled debt restructuring.  The restructured loan was modified by lowering of the interest rate.  Based on the fair value of the collateral, no specific reserve was determined necessary for this loan.  Also, there was no immediate financial impact from the restructuring of this loan, as it was not considered necessary to charge-off interest or principal on the date of restructure.

There were no loans for which a payment default occurred during the six months ended June 30, 2013 and 2012, and that had been modified as a TDR within 12 months or less of the payment default, excluding loans acquired.  We define a payment default as a payment received more than 90 days after its due date.

Credit Quality Indicators – As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk rating of commercial and real estate loans, (ii) the level of classified commercial and real estate loans, (iii) net charge-offs, (iv) non-performing loans (see details above) and (v) the general economic conditions in the States of Arkansas, Kansas and Missouri.

The Company utilizes a risk rating matrix to assign a risk rate to each of its commercial and real estate loans. Loans are rated on a scale of 1 to 8.  A description of the general characteristics of the 8 risk ratings is as follows:

· Risk Rate 1 – Pass (Excellent) – This category includes loans which are virtually free of credit risk.  Borrowers in this category represent the highest credit quality and greatest financial strength.

· Risk Rate 2 – Pass (Good) - Loans under this category possess a nominal risk of default.  This category includes borrowers with strong financial strength and superior financial ratios and trends.  These loans are generally fully secured by cash or equivalents (other than those rated "excellent”).

· Risk Rate 3 – Pass (Acceptable – Average) - Loans in this category are considered to possess a normal level of risk.  Borrowers in this category have satisfactory financial strength and adequate cash flow coverage to service debt requirements.  If secured, the perfected collateral should be of acceptable quality and within established borrowing parameters.

· Risk Rate 4 – Pass (Monitor) - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent "red flags".  These "red flags" require a higher level of supervision or monitoring than the normal "Pass" rated credit.  The borrower may be experiencing these conditions for the first time, or it may be recovering from weakness, which at one time justified a harsher rating.  These conditions may include: weaknesses in financial trends; marginal cash flow; one-time negative operating results; non-compliance with policy or borrowing agreements; poor diversity in operations; lack of adequate monitoring information or lender supervision; questionable management ability/stability.

· Risk Rate 5 – Special Mention - A loan in this category has potential weaknesses that deserve management's close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution's credit position at some future date.  Special Mention loans are not adversely classified (although they are "criticized") and do not expose an institution to sufficient risk to warrant adverse classification.  Borrowers may be experiencing adverse operating trends, or an ill-proportioned balance sheet.  Non-financial characteristics of a Special Mention rating may include management problems, pending litigation, a non-existent, or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices.

· Risk Rate 6 – Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any.  Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt.  The loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.  This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the loan.

· Risk Rate 7 – Doubtful – A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. Doubtful borrowers are usually in default, lack adequate liquidity, or capital, and lack the resources necessary to remain an operating entity.  The possibility of loss is extremely high, but because of specific pending events that may strengthen the asset, its classification as loss is deferred.  Pending factors include: proposed merger or acquisition; liquidation procedures; capital injection; perfection of liens on additional collateral; and refinancing plans.  Loans classified as Doubtful are placed on nonaccrual status.

· Risk Rate 8 – Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.  This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery may be affected in the future.  Borrowers in the Loss category are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations.  Loans should be classified as Loss and charged-off in the period in which they become uncollectible.

Loans acquired, including loans covered by FDIC loss share agreements, are evaluated using this internal grading system.  However, since these loans are accounted for in pools, all of the loan pools were considered satisfactory at June 30, 2013 and December 31, 2012, respectively.  Loans acquired, covered by loss share agreements, have additional protection provided by the FDIC.  See Note 5, Loans Acquired, for further discussion of the acquired loan pools and loss sharing agreements.

Classified loans for the Company include loans in Risk Ratings 6, 7 and 8.  Loans may be classified, but not considered impaired, due to one of the following reasons:  (1) The Company has established minimum dollar amount thresholds for loan impairment testing.  Loans rated 6 – 8 that fall under the threshold amount are not tested for impairment and therefore are not included in impaired loans.  (2) Of the loans that are above the threshold amount and tested for impairment, after testing, some are considered to not be impaired and are not included in impaired loans.  Total classified loans were $38.7 million and $39.0 million as of June 30, 2013 and December 31, 2012, respectively.

The following table presents a summary of loans by credit risk rating as of June 30, 2013 and December 31, 2012, segregated by class of loans.

(In thousands)	Risk Rate 1-4		Risk Rate 5		Risk Rate 6		Risk Rate 7		Risk Rate 8		Total
June 30, 2013
Consumer:
Credit cards	$	173,029	$	--	$	507	$	--	$	--	$	173,536
Student loans		27,852		--		2,254		--		--		30,106
Other consumer		102,272		4		1,408		62		19		103,765
Total consumer		303,153		4		4,169		62		19		307,407
Real estate:
Construction		138,888		77		3,937		--		--		142,902
Single family residential		356,634		1,440		6,165		--		--		364,239
Other commercial		542,950		7,264		21,896		--		--		572,110
Total real estate		1,038,472		8,781		31,998		--		--		1,079,251
Commercial:
Commercial		149,631		203		2,288		--		--		152,122
Agricultural		106,936		--		177		--		--		107,113
Total commercial		256,567		203		2,465		--		--		259,235
Other		4,502		--		--		--		--		4,502
Loans acquired, covered by FDIC loss share		163,736		--		--		--		--		163,736
Loans acquired, not covered by FDIC loss share		63,500		--		--		--		--		63,500
Total	$	1,829,930	$	8,988	$	38,632	$	62	$	19	$	1,877,631

(In thousands)	Risk Rate 1-4		Risk Rate 5		Risk Rate 6		Risk Rate 7		Risk Rate 8		Total
December 31, 2012
Consumer:
Credit cards	$	184,989	$	--	$	547	$	--	$	--	$	185,536
Student loans		31,911		--		2,234		--		--		34,145
Other consumer		103,597		7		1,660		33		22		105,319
Total consumer		320,497		7		4,441		33		22		325,000
Real estate:
Construction		131,873		30		6,229		--		--		138,132
Single family residential		348,628		1,458		6,821		--		--		356,907
Other commercial		540,986		8,484		18,696		--		--		568,166
Total real estate		1,021,487		9,972		31,746		--		--		1,063,205
Commercial:
Commercial		138,948		114		2,235		39		--		141,336
Agricultural		93,357		--		448		--		--		93,805
Total commercial		232,305		114		2,683		39		--		235,141
Other		5,167		--		--		--		--		5,167
Loans acquired, covered by FDIC loss share		210,842		--		--		--		--		210,842
Loans acquired, not covered by FDIC loss share		82,764		--		--		--		--		82,764
Total	$	1,873,062	$	10,093	$	38,870	$	72	$	22	$	1,922,119

Net (charge-offs)/recoveries for the three and six months ended June 30, 2013 and 2012, excluding loans acquired, segregated by class of loans, were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2013			2012			2013			2012
Consumer:
Credit cards	$	(539	)	$	(617	)	$	(1,212	)	$	(1,404	)
Student loans		(17	)		(20	)		(30	)		(38	)
Other consumer		(177	)		(97	)		(343	)		(149	)
Total consumer		(733	)		(734	)		(1,585	)		(1,591	)
Real estate:
Construction		(7	)		--			(119	)		46
Single-family residential		(54	)		9			(89	)		(211	)
Other commercial		(531	)		161			(555	)		(1,274	)
Total real estate		(592	)		170			(763	)		(1,439	)
Commercial:
Commercial		(28	)		11			(57	)		(43	)
Agriculture		(18	)		(150	)		(32	)		(184	)
Total commercial		(46	)		(139	)		(89	)		(227	)
Total	$	(1,371	)	$	(703	)	$	(2,437	)	$	(3,257	)

Allowance for Loan Losses – The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans.  The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio.  The Company’s allowance for loan loss methodology includes allowance allocations calculated in accordance with ASC Topic 310-10, Receivables, and allowance allocations calculated in accordance with ASC Topic 450-20, Loss Contingencies.  Accordingly, the methodology is based on the Company’s internal grading system, specific impairment analysis, qualitative and quantitative factors.

As mentioned above, allocations to the allowance for loan losses are categorized as either specific allocations or general allocations.

A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loan, including scheduled principal and interest payments.  For a collateral dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral analysis.  This valuation is compared to the remaining outstanding principal balance of the loan.  If a loss is determined to be probable, the loss is included in the allowance for loan losses as a specific allocation.  If the loan is not collateral dependent, the measurement of loss is based on the fair value of the difference between the expected and contractual future cash flows of the loan.

The general allocation is calculated monthly based on management’s assessment of several factors such as (1) historical loss experience based on loan volumes and types, (2) volume and trends in delinquencies and nonaccruals, (3) lending policies and procedures including those for loan losses, collections and recoveries, (4) national, state and local economic trends and conditions, (5) concentrations of credit within the loan portfolio, (6) the experience, ability and depth of lending management and staff and (7) other factors and trends that will affect specific loans and categories of loans.  The Company establishes general allocations for each major loan category.  This category also includes allocations to loans which are collectively evaluated for loss such as credit cards, one-to-four family owner occupied residential real estate loans and other consumer loans.

As of December 31, 2012, the Company refined its allowance calculation.  As part of the refinement process, management evaluated the criteria previously applied to the entire loan portfolio, and used to calculate the unallocated portion of the allowance, and applied those criteria to each specific loan category.  This included the impact of national, state and local economic trends, external factors and competition, economic outlook and business conditions and other factors and trends that will affect specific loans and categories of loans.  As a result of the refined allowance calculation, the allocation of the Company’s allowance for loan losses may not be comparable with periods prior to December 31, 2012.

The following table details activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2013.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

(In thousands)	Commercial			Real Estate			Credit Card			Other Consumer and Other			Unallocated		Total
Three Months Ended June 30, 2013
Balance, beginning of period	$	3,532		$	16,131		$	6,799		$	1,273		$	--	$	27,735
Provision for loan losses		233			(64	)		616			249			--		1,034
Charge-offs		(133	)		(887	)		(743	)		(310	)		--		(2,073	)
Recoveries		87			295			204			116			--		702
Net charge-offs		(46	)		(592	)		(539	)		(194	)		--		(1,371	)
Balance, June 30, 2013	$	3,719		$	15,475		$	6,876		$	1,328		$	--	$	27,398
Six Months Ended June 30, 2013
Balance, beginning of period	$	3,446		$	15,453		$	7,211		$	1,772		$	--	$	27,882
Provision for loan losses		362			785			877			(71	)		--		1,953
Charge-offs		(229	)		(1,126	)		(1,652	)		(684	)		--		(3,691	)
Recoveries		140			363			440			311			--		1,254
Net charge-offs		(89	)		(763	)		(1,212	)		(373	)		--		(2,437	)
Balance, June 30, 2013	$	3,719		$	15,475		$	6,876		$	1,328		$	--	$	27,398
Period-end amount allocated to:
Loans individually evaluated for impairment	$	114		$	1,509		$	76		$	196		$	--	$	1,895
Loans collectively evaluated for impairment		3,605			13,966			6,800			1,132			--		25,503
Balance, June 30, 2013	$	3,719		$	15,475		$	6,876		$	1,328		$	--	$	27,398

Activity in the allowance for loan losses for the three and six months ended June 30, 2012 was as follows:

(In thousands)	Commercial			Real Estate			Credit Card			Other Consumer and Other			Unallocated			Total
Three Months Ended June 30, 2012
Balance, beginning of period	$	1,914		$	9,641		$	5,500		$	1,771		$	9,499		$	28,325
Provision for loan losses		208			657			603			122			(815	)		775
Charge-offs		(165	)		(78	)		(829	)		(252	)		--			(1,324	)
Recoveries		26			248			212			135			--			621
Net charge-offs		(139	)		170			(617	)		(117	)		--			(703	)
Balance, June 30, 2012	$	1,983		$	10,468		$	5,486		$	1,776		$	8,684		$	28,397
Six Months Ended June 30, 2012
Balance, beginning of period	$	2,063		$	10,117		$	5,513		$	1,847		$	10,568		$	30,108
Provision for loan losses		147			1,790			1,377			116			(1,884	)		1,546
Charge-offs		(294	)		(2,617	)		(1,826	)		(478	)		--			(5,215	)
Recoveries		67			1,178			422			291			--			1,958
Net charge-offs		(227	)		(1,439	)		(1,404	)		(187	)		--			(3,257	)
Balance, June 30, 2012	$	1,983		$	10,468		$	5,486		$	1,776		$	8,684		$	28,397
Period-end amount allocated to:
Loans individually evaluated for impairment	$	187		$	2,888		$	80		$	244		$	--		$	3,399
Loans collectively evaluated for impairment		1,796			7,580			5,406			1,532			8,684			24,998
Balance, June 30, 2012	$	1,983		$	10,468		$	5,486		$	1,776		$	8,684		$	28,397
Period-end amount allocated to:
Loans individually evaluated for impairment	$	203		$	2,309		$	82		$	249		$	--		$	2,843
Loans collectively evaluated for impairment		3,243			13,144			7,129			1,523			--			25,039
Balance, December 31, 2012	$	3,446		$	15,453		$	7,211		$	1,772		$	--		$	27,882

The Company’s recorded investment in loans, excluding loans acquired, related to each balance in the allowance for loan losses by portfolio segment on the basis of the Company’s impairment methodology was as follows:

(In thousands)	Commercial		Real Estate		Credit Card		Other Consumer and Other		Total
June 30, 2013
Loans individually evaluated for impairment	$	694	$	14,438	$	507	$	1,020	$	16,659
Loans collectively evaluated for impairment		258,541		1,064,813		173,029		137,353		1,633,736
Balance, end of period	$	259,235	$	1,079,251	$	173,536	$	138,373	$	1,650,395
December 31, 2012
Loans individually evaluated for impairment	$	768	$	28,358	$	547	$	1,130	$	30,803
Loans collectively evaluated for impairment		234,373		1,034,847		184,989		143,501		1,597,710
Balance, end of period	$	235,141	$	1,063,205	$	185,536	$	144,631	$	1,628,513