Our business is subject to domestic and, to a lesser extent, international economic conditions and other factors, many  of which are beyond our control and could materially and adversely affect us. The soundness of other financial institutions could negatively affect us. Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.  36  We established our allowance for loan losses and maintain it at a level considered appropriate by management to  absorb loan losses that are inherent in the portfolio. Additionally, our Board of Directors regularly monitors the  appropriateness of our allowance for loan loses. The allowance is also subject to regulatory examinations and a  determination by the regulatory agencies as to the appropriate level of the allowance. The amount of future loan losses is  susceptible to changes in economic, operating and other conditions, including changes in interest rates and the value of the  underlying collateral, which may be beyond our control, and such losses may exceed current estimates. At December 31,  2012 and 2011 our allowance for loan losses as a percentage of total loans was 1.43% and 1.50%, respectively, and as a  percentage of total non-performing loans was 50.30% and 331.71%, respectively. Although management believes that the  allowance for loan losses is appropriate to absorb losses on any existing loans that may become uncollectible, we cannot  Our ability to engage in routine funding and other transactions could be negatively affected by the actions and  commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading,  clearing, counterparty or other relationships. Defaults by, or even rumors or questions about, one or more financial services  institutions, or the financial services industry generally, have led to market-wide liquidity problems and losses of depositor,  creditor and counterparty confidence and could lead to losses or defaults by us or by other institutions. We could  experience increases in deposits and assets as a result of the difficulties or failures of other banks, which would increase the  capital we need to support our growth.  Overall, although showing signs of improvement, the business environment in recent years was unfavorable for  many households and businesses in the United States While economic conditions in the state of Kansas and the United  States have generally improved since the recession, there can be no assurance that this improvement will continue or occur  at a meaningful rate. Such conditions could materially and adversely affect us.  Further, concerns about the European Union's sovereign debt crisis have also caused uncertainty for financial  markets globally in recent years. Such risks could indirectly affect us by affecting our hedging or other counterparties, as  well as our customers with European businesses or assets denominated in the euro or companies in our market with  European businesses or affiliates. Our financial performance generally, and in particular the ability of customers to pay interest on and repay  principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other  products and services we offer, is highly dependent upon the business environment not only in the markets where we  operate, but also in the state of Kansas generally and in the United States as a whole. A favorable business environment is  generally characterized by, among other factors: economic growth; efficient capital markets; low inflation; low  unemployment; high business and investor confidence; and strong business earnings. Unfavorable or uncertain economic  and market conditions can be caused by: declines in economic growth, business activity or investor or business confidence;  limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high  unemployment; natural disasters; or a combination of these or other factors. Market conditions also led to the failure or merger of several prominent financial institutions and numerous  regional and community-based financial institutions. These failures, as well as projected future failures, have had a  significant negative impact on the capitalization level of the DIF, which, in turn, has led to a significant increase in deposit  insurance premiums paid by financial institutions. From December 2007 through June 2009, the U.S. economy was in recession. Business activity across a wide  range of industries and regions in the U.S. was greatly reduced. Although general economic conditions have improved,  certain sectors remain weak, and unemployment remains at historically high levels, including the State of Kansas, where  most of our customers are located. In addition, local governments and many businesses continue to experience serious  difficulty due to depressed levels of consumer spending and decreased liquidity in the credit markets.