Interest rates and other conditions impact our results of operations.  Our profitability is in part a function of the spread between the interest rates earned on investments and loans and  the interest rates paid on deposits and other interest-bearing liabilities. Like most banking institutions, our net interest  spread and margin will be affected by general economic conditions and other factors, including fiscal and monetary policies  of the federal government, that influence market interest rates and our ability to respond to changes in such rates. At any  given time, our assets and liabilities will be such that they are affected differently by a given change in interest rates. As a  result, an increase or decrease in rates, the length of loan terms or the mix of adjustable and fixed rate loans in our portfolio  could have a positive or negative effect on our net income, capital and liquidity. We measure interest rate risk under various  rate scenarios and using specific criteria and assumptions. A summary of this process, along with the results of our net  interest income simulations is presented in the section entitled “Management’s Discussion and Analysis of Financial  Condition and Results of Operations.” Although we believe our current level of interest rate sensitivity is reasonable and  effectively managed, significant fluctuations in interest rates may have an adverse effect on our business, financial condition  and results of operations.  Changes in interest rates also can affect the value of loans, securities and other assets. An increase in interest rates  that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in non- performing assets and a reduction of income recognized, which could have a material adverse effect on our results of  operations and cash flows. Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest  receivable, which decreases interest income. Subsequently, we continue to have a cost to fund the loan, which is reflected as  interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount of  non-performing assets would have an adverse impact on net interest income.  Rising interest rates will result in a decline in value of our fixed-rate debt securities. The unrealized losses resulting  from holding these securities would be recognized in other comprehensive income and reduce total stockholders' equity.  Unrealized losses do not negatively impact our regulatory capital ratios; however, tangible common equity and the  associated ratios would be reduced. If debt securities in an unrealized loss position are sold, such losses become realized  and will reduce our regulatory capital ratios.  We must effectively manage our credit risk. There are risks inherent in making any loan, including risks inherent in dealing with individual borrowers, risks of  nonpayment, risks resulting from uncertainties as to the future value of collateral and risks resulting from changes in  economic and industry conditions. We attempt to minimize our credit risk through prudent loan application approval  procedures, careful monitoring of the concentration of our loans within specific industries and periodic independent reviews  of outstanding loans by our credit review department. However, we cannot assure you that such approval and monitoring  procedures will reduce these credit risks. If the overall economic climate in the United States, generally, and our market  areas, specifically, fails to improve meaningfully, or even if it does, our borrowers may experience difficulties in repaying  their loans, and the level of non-performing loans, charge-offs and delinquencies could rise and require increases in the  provision for loan losses, which would cause our net income and return on equity to decrease. Most of our loans are commercial, real estate, or agriculture loans, each of which is subject to distinct types of risk. To reduce the lending risks we face, we generally take a security interest in borrowers’ property for all three types of loans. In addition, we sell certain residential real estate loans to third parties. Nevertheless, the risk of non-payment is inherent in  all three types of loans and if we are unable to collect amounts owed, it may materially affect our operations and financial  performance. For a more complete discussion of our lending activities see Item 1 of this Annual Report on Form 10-K.  Non-performing assets take significant time to resolve and adversely affect our results of operations and financial  condition, and could result in further losses in the future.  As of December 31, 2012, our non-performing loans (which consist of nonaccrual loans and loans past due 90 days  or more and still accruing interest) totaled $9.1 million, or 2.84% of our loan portfolio, and our non-performing assets  (which include non-performing loans plus real estate owned) totaled $11.6 million, or 1.88% of total assets. In addition, we  had $2.2 million in accruing loans that were 30-89 days delinquent as of December 31, 2012.  40 