LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES (Tables)

12 Months Ended

Dec. 31, 2015

Summary of loan portfolio and allowance for loan losses

The following table summarizes the primary segments of the loan portfolio, as well as how those segments are analyzed within the allowance for loan losses as of December 31, 2015 and 2014 (in thousands):

2015	Total Loans	Individually evaluated for impairment	Loans acquired with deteriorated credit quality	Collectively evaluated for impairment
Real estate loans:
Residential	$ 203,407	$ 304	$ 35	$ 203,068
Commercial and agricultural	295,364	6,235	2,908	286,221
Construction	15,011	-	-	15,011
Consumer	11,543	-	9	11,534
Other commercial and agricultural loans	71,206	5,745	866	64,595
State and political subdivision loans	98,500	-	-	98,500
Total	695,031	12,284	3,818	678,929
Allowance for loan losses	7,106	355	-	6,751
Net loans	$ 687,925	$ 11,929	$ 3,818	$ 672,178

2014	Total Loans	Individually evaluated for impairment	Loans acquired with deteriorated credit quality	Collectively evaluated for impairment
Real estate loans:
Residential	$ 185,438	$ 316	$ -	$ 185,122
Commercial and agricultural	215,584	6,112	-	209,472
Construction	6,353	-	-	6,353
Consumer	8,497	-	-	8,497
Other commercial and agricultural loans	58,516	2,394	-	56,122
State and political subdivision loans	79,717	-	-	79,717
Total	554,105	8,822	-	545,283
Allowance for loan losses	6,815	98	-	6,717
Net loans	$ 547,290	$ 8,724	$ -	$ 538,566

Impaired loans acquired

The table below presents the components of the purchase accounting adjustments related to the purchased impaired loans acquired in the FNB Acquisition as of December 11, 2015:

(In Thousands)		December 11, 2015
Contractually required principal and interest at acquisition		$ 9,913
Non-accretable discount		(5,439)
Expected cash flows		4,474
Accretable discount		(665)
Estimated fair value		$ 3,809

Amortizable yield for purchased credit impaired loans

Changes in the amortizable yield for purchased credit-impaired loans were as follows for the month ended December 31, 2015:

(In Thousands)	December 31, 2015
Balance at beginning of period	$ 665
Accretion		(28)
Balance at end of period	$ 637

Loans acquired with specific evidence of deterioration in credit quality

The following table presents additional information regarding loans acquired with specific evidence of deterioration in credit quality under ASC 310-30:

(In Thousands)	December 11, 2015	December 31, 2015
Outstanding balance	$ 6,969	$ 6,950
Carrying amount	3,809	3,818

Impaired financing receivables with associated allowance amount

The following table includes the recorded investment and unpaid principal balances for impaired loans by class, with the associated allowance amount as of December 31, 2015 and 2014, if applicable (in thousands):

		Recorded	Recorded
	Unpaid	Investment	Investment	Total
	Principal	With No	With	Recorded	Related
	Balance	Allowance	Allowance	Investment	Allowance
2015
Real estate loans:
Mortgages	$ 281	$ 114	$ 129	$ 243	$ 26
Home Equity	61	-	61	61	11
Commercial	8,654	5,843	225	6,068	62
Agricultural	167	167	-	167	-
Construction	-	-	-	-	-
Consumer	-	-	-	-	-
Other commercial loans	5,535	4,653	987	5,640	256
Other agricultural loans	105	105	-	105	-
State and political
subdivision loans	-	-	-	-	-
Total	$ 14,803	$ 10,882	$ 1,402	$ 12,284	$ 355

2014
Real estate loans:
Mortgages	$ 222	$ 125	$ 66	$ 191	$ 13
Home Equity	130	60	65	125	12
Commercial	8,433	5,708	404	6,112	72
Agricultural	-	-	-	-	-
Construction	-	-	-	-	-
Consumer	-	-	-	-	-
Other commercial loans	2,480	2,346	48	2,394	1
Other agricultural loans	-	-	-	-	-
State and political
subdivision loans	-	-	-	-	-
Total	$ 11,265	$ 8,239	$ 583	$ 8,822	$ 98

The following table includes the average investment in impaired loans and the income recognized on impaired loans for 2015, 2014 and 2013 (in thousands):

			Interest
	Average	Interest	Income
	Recorded	Income	Recognized
2015	Investment	Recognized	Cash Basis
Real estate loans:
Mortgages	$ 240	$ 12	$ -
Home Equity	88	4	-
Commercial	5,683	63	5
Agricultural	56	2	-
Construction	-	-	-
Consumer	-	-	-
Other commercial loans	2,700	98	6
Other agricultural loans	37	1	-
State and political subdivision loans	-	-	-
Total	$ 8,804	$ 180	$ 11

2014
Real estate loans:
Mortgages	$ 198	$ 9	$ -
Home Equity	130	4	-
Commercial	7,270	54	-
Agricultural	-	-	-
Construction	-	-	-
Consumer	10	-	-
Other commercial loans	2,031	79	-
Other agricultural loans	-	-	-
State and political subdivision loans	-	-	-
Total	$ 9,639	$ 146	$ -

2013
Real estate loans:
Mortgages	$ 327	$ 7	$ -
Home Equity	136	4	-
Commercial	8,499	457	377
Agricultural	-	-	-
Construction	-	-	-
Consumer	5	-	-
Other commercial loans	1,761	79	-
Other agricultural loans	-	-	-
State and political subdivision loans	-	-	-
Total	$ 10,728	$ 547	$ 377

Summary of financing receivable credit exposures by internally assigned grades

The following tables represent credit exposures by internally assigned grades as of December 31, 2015 and 2014 (in thousands):

	Pass	Special Mention	Substandard	Doubtful	Loss	Ending Balance
2015
Real estate loans:
Commercial	$ 217,544	$ 4,150	$ 15,816	$ 32	$ -	$ 237,542
Agricultural	53,695	2,865	1,262	-	-	57,822
Construction	14,422	589	-	-	-	15,011
Other commercial loans	51,297	446	5,669	137	-	57,549
Other agricultural loans	13,318	234	105	-	-	13,657
State and political
subdivision loans	98,500	-	-	-	-	98,500
Total	$ 448,776	$ 8,284	$ 22,852	$ 169	$ -	$ 480,081

2014
Real estate loans:
Commercial	$ 169,383	$ 8,948	$ 12,614	$ -	$ -	$ 190,945
Agricultural	19,575	3,394	1,670	-	-	24,639
Construction	6,353	-	-	-	-	6,353
Other commercial loans	40,683	4,413	2,355	-	-	47,451
Other agricultural loans	9,221	727	1,117	-	-	11,065
State and political
subdivision loans	79,717	-	-	-	-	79,717
Total	$ 324,932	$ 17,482	$ 17,756	$ -	$ -	$ 360,170

For residential real estate mortgages, home equities and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail below and all loans past due 90 or more days. The following table presents the recorded investment in those loan classes based on payment activity as of December 31, 2015 and 2014 (in thousands):

2015	Performing	Non-performing	PCI	Total
Real estate loans:
Mortgages	$ 139,734	$ 1,270	$ 35	$ 141,039
Home Equity	62,236	132	-	62,368
Consumer	11,470	64	9	11,543
Total	$ 213,440	$ 1,466	$ 44	$ 214,950

2014	Performing	Non-performing	PCI	Total
Real estate loans:
Mortgages	$ 121,968	$ 890	$ -	$ 122,858
Home Equity	62,296	284	-	62,580
Consumer	8,444	53	-	8,497
Total	$ 192,708	$ 1,227	$ -	$ 193,935

Age analysis of past due financing receivables

The following table includes an aging analysis of the recorded investment of past due loans as of December 31, 2015 and 2014 (in thousands):

		30-59 Days	60-89 Days	90 Days	Total Past			Total Financing	90 Days and
2015		Past Due	Past Due	Or Greater	Due	Current	PCI	Receivables	Accruing
Real estate loans:
Mortgages		$ 487	$ 283	$ 687	$ 1,457	$ 139,547	$ 35	$ 141,039	$ 321
Home Equity		630	15	121	766	61,602	-	62,368	73
Commercial		824	57	4,139	5,020	230,352	2,170	237,542	60
Agricultural		177	167	-	344	56,740	738	57,822	-
Construction		-	-	-	-	15,011	-	15,011	-
Consumer		239	37	49	325	11,209	9	11,543	9
Other commercial loans		143	214	1,010	1,367	55,316	866	57,549	160
Other agricultural loans		9	-	-	9	13,648	-	13,657	-
State and political
subdivision loans		-	-	-	-	98,500	-	98,500	-
	Total	$ 2,509	$ 773	$ 6,006	$ 9,288	$ 681,925	$ 3,818	$ 695,031	$ 623

Loans considered non-accrual		$ 54	$ 171	$ 5,383	$ 5,608	$ 923	$ -	$ 6,531
Loans still accruing		2,455	602	623	3,680	681,002	3,818	688,500
	Total	$ 2,509	$ 773	$ 6,006	$ 9,288	$ 681,925	$ 3,818	$ 695,031

		30-59 Days	60-89 Days	90 Days	Total Past			Total Financing	90 Days and
2014		Past Due	Past Due	Or Greater	Due	Current	PCI	Receivables	Accruing
Real estate loans:
Mortgages		$ 318	$ 230	$ 675	$ 1,223	$ 121,635	$ -	$ 122,858	$ 214
Home Equity		442	99	260	801	61,779	-	62,580	132
Commercial		97	231	1,432	1,760	189,185	-	190,945	310
Agricultural		-	-	-	-	24,639	-	24,639	-
Construction		-	-	-	-	6,353	-	6,353	-
Consumer		119	4	7	130	8,367	-	8,497	6
Other commercial loans		503	258	476	1,237	46,214	-	47,451	174
Other agricultural loans		-	-	-	-	11,065	-	11,065	-
State and political
subdivision loans		-	-	-	-	79,717	-	79,717	-
	Total	$ 1,479	$ 822	$ 2,850	$ 5,151	$ 548,954	$ -	$ 554,105	$ 836

Loans considered non-accrual		$ 48	$ 181	$ 2,014	$ 2,243	$ 4,356	$ -	$ 6,599
Loans still accruing		1,431	641	836	2,908	544,598	-	547,506
	Total	$ 1,479	$ 822	$ 2,850	$ 5,151	$ 548,954	$ -	$ 554,105

Summary of financing receivables on nonaccrual status

The following table reflects the loans on nonaccrual status as of December 31, 2015 and 2014, respectively. The balances are presented by class of loan (in thousands):

	2015	2014
Real estate loans:
Mortgages	$ 949	$ 676
Home Equity	59	152
Commercial	4,422	5,010
Agricultural	34	-
Construction	-	-
Consumer	55	47
Other commercial loans	1,012	714
Other agricultural loans	-	-
State and political subdivision	-	-
	$ 6,531	$ 6,599

Summary of troubled debt restructurings on financing receivables

Loan modifications that are considered TDRs completed during the years ended December 31, 2015, 2014 and 2013 were as follows (dollars in thousands):

	Number of contracts		Pre-modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	Interest Modification	Term Modification	Interest Modification	Term Modification	Interest Modification	Term Modification
2015
Real estate loans:
Mortgages	1	1	$ 71	$ 19	$ 71	$ 19
Total	1	1	$ 71	$ 19	$ 71	$ 19

2014
Real estate loans:
Commercial	-	2	$ -	$ 153	$ -	$ 153
Total	-	2	$ -	$ 153	$ -	$ 153

2013
Real estate loans:
Mortgages	1	-	$ 72	$ -	$ 72	$ -
Commercial	-	2	-	1,365	-	1,365
Other commercial loans	-	2	-	1,530	-	1,530
Total	1	4	$ 72	$ 2,895	$ 72	$ 2,895

Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a non-accrual loan. Recidivism occurs at a notably higher rate than do defaults on new origination loans, so modified loans present a higher risk of loss than do new origination loans. The following table presents the recorded investment in loans that were modified as TDRs during each 12-month period prior to the current reporting periods, which begin January 1, 2015, 2014 and 2013, respectively, and that subsequently defaulted during these reporting periods (dollars in thousands):

	2015		2014		2013
	Number of contracts	Recorded investment	Number of contracts	Recorded investment	Number of contracts	Recorded investment
Real estate loans:
Commercial	-	$ -	1	$ 50	1	$ 55
Other commercial loans	-	-	-	-	1	6
Total recidivism	-	$ -	1	$ 50	2	$ 61

Roll forward of allowance for loan losses by portfolio segment

The following tables roll forward the balance of the allowance for loan and lease losses for the years ended December 31, 2015, 2014 and 2013 and is segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of December 31, 2015, 2014 and 2013 (in thousands):

	Balance at December 31, 2014	Charge-offs	Recoveries	Provision	Balance at December 31, 2015	Individually evaluated for impairment	Collectively evaluated for impairment
Real estate loans:
Residential	$ 878	$ (66)	$ -	$ 93	$ 905	$ 37	$ 868
Commercial and agricultural	3,870	(84)	14	(15)	3,785	62	3,723
Construction	26	-	-	(2)	24	-	24
Consumer	84	(47)	33	32	102	-	102
Other commercial and agricultural loans	1,224	(41)	2	120	1,305	256	1,049
State and political				-
subdivision loans	545	-	-	48	593	-	593
Unallocated	188	-	-	204	392	-	392
Total	$ 6,815	$ (238)	$ 49	$ 480	$ 7,106	$ 355	$ 6,751

	Balance at December 31, 2013	Charge-offs	Recoveries	Provision	Balance at December 31, 2014	Individually evaluated for impairment	Collectively evaluated for impairment
Real estate loans:
Residential	$ 946	$ (97)	$ -	$ 29	$ 878	$ 25	$ 853
Commercial and agricultural	4,558	(516)	15	(187)	3,870	72	3,798
Construction	50	-	-	(24)	26	-	26
Consumer	105	(47)	27	(1)	84	-	84
Other commercial and agricultural loans	942	(250)	-	532	1,224	1	1,223
State and political				-
subdivision loans	330	-	-	215	545	-	545
Unallocated	167	-	-	21	188	-	188
Total	$ 7,098	$ (910)	$ 42	$ 585	$ 6,815	$ 98	$ 6,717

	Balance at December 31, 2012	Charge-offs	Recoveries	Provision	Balance at December 31, 2013	Individually evaluated for impairment	Collectively evaluated for impairment
Real estate loans:
Residential	$ 875	$ (17)	$ 5	$ 83	$ 946	$ 27	$ 919
Commercial and agricultural	4,437	(62)	5	178	4,558	305	4,253
Construction	38	-	-	12	50	-	50
Consumer	119	(54)	33	7	105	-	105
Other commercial and agricultural loans	728	(1)	-	215	942	1	941
State and political				-
subdivision loans	271	-	-	59	330	-	330
Unallocated	316	-	-	(149)	167	-	167
Total	$ 6,784	$ (134)	$ 43	$ 405	$ 7,098	$ 333	$ 6,765