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LOANS AND ALLOWANCE FOR LOAN LOSSES | 3 Months Ended
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Mar. 31, 2014
LOANS AND ALLOWANCE FOR LOAN LOSSES [Abstract] |
LOANS AND ALLOWANCE FOR LOAN LOSSES | NOTE 4 LOANS AND ALLOWANCE FOR LOAN LOSSES The composition of the loan portfolio, net of deferred origination fees and cost, and unearned income is summarized as follows (dollars in thousands):
|  | March 31, 2014 |  |  | December 31, 2013 |
Commercial and agricultural: |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 144,681 |  |  | $ | 144,787 |
Agricultural |  |  | 534 |  |  |  | 576 |
Commercial mortgages: |  |  |  |  |  |  |  |
Construction |  |  | 29,692 |  |  |  | 27,440 |
Commercial mortgages |  |  | 367,175 |  |  |  | 345,707 |
Residential mortgages |  |  | 196,396 |  |  |  | 195,997 |
Consumer loans: |  |  |  |  |  |  |  |
Credit cards |  |  | 1,583 |  |  |  | 1,756 |
Home equity lines and loans |  |  | 95,827 |  |  |  | 95,905 |
Indirect consumer loans |  |  | 170,853 |  |  |  | 164,846 |
Direct consumer loans |  |  | 17,824 |  |  |  | 18,852 |
Total loans, net of deferred origination fees and costs, and unearned income |  | $ | 1,024,565 |  |  | $ | 995,866 |
Interest receivable on loans |  |  | 2,367 |  |  |  | 2,597 |
Total recorded investment in loans |  | $ | 1,026,932 |  |  | $ | 998,463 |
The Corporation's concentrations of credit risk by loan type are reflected in the preceding table. The concentrations of credit risk with standby letters of credit, committed lines of credit and commitments to originate new loans generally follow the loan classifications in the table above. The following tables present the activity in the allowance for loan losses by portfolio segment for the three-month periods ending March 31, 2014 and 2013 (dollars in thousands):
|  | Three Months Ended |
|  | March 31, 2014 |
Allowance for loan losses |  | Commercial and Agricultural |  |  | Commercial Mortgages |  |  | Residential Mortgages |  |  | Consumer Loans |  |  | Unallocated |  |  | Total |
Beginning balance: |  | $ | 1,979 |  |  | $ | 6,243 |  |  | $ | 1,517 |  |  | $ | 3,037 |  |  | $ | - |  |  | $ | 12,776 |
Charge Offs: |  |  | (55 | ) |  |  | (44 | ) |  |  | (7 | ) |  |  | (467 | ) |  |  | - |  |  |  | (573 | )
Recoveries: |  |  | 92 |  |  |  | 38 |  |  |  | - |  |  |  | 183 |  |  |  | - |  |  |  | 313 |
Net recoveries (charge offs) |  |  | 37 |  |  |  | (6 | ) |  |  | (7 | ) |  |  | (284 | ) |  |  | - |  |  |  | (260 | )
Provision |  |  | (71 | ) |  |  | 247 |  |  |  | 42 |  |  |  | 421 |  |  |  | - |  |  |  | 639 |
Ending balance |  | $ | 1,945 |  |  | $ | 6,484 |  |  | $ | 1,552 |  |  | $ | 3,174 |  |  | $ | - |  |  | $ | 13,155 |
|  | Three Months Ended |
|  | March 31, 2013 |
Allowance for loan losses |  | Commercial and Agricultural |  |  | Commercial Mortgages |  |  | Residential Mortgages |  |  | Consumer Loans |  |  | Unallocated |  |  | Total |
Beginning balance: |  | $ | 1,707 |  |  | $ | 4,428 |  | $ |  | 1,566 |  |  | $ | 2,706 |  |  | $ | 26 |  |  | $ | 10,433 |  |
Charge Offs: |  |  | (17 | ) |  |  | - |  |  |  | (44 | ) |  |  | (197 | ) |  |  | - |  |  |  | (258 | ) |
Recoveries: |  |  | 142 |  |  |  | 9 |  |  |  | - |  |  |  | 68 |  |  |  | - |  |  |  | 219 |  |
Net recoveries (charge-offs) |  |  | 125 |  |  |  | 9 |  |  |  | (44 | ) |  |  | (129 | ) |  |  | - |  |  |  | (39 | ) |
Provision |  |  | 161 |  |  |  | 236 |  |  |  | 35 |  |  |  | 25 |  |  |  | (26) |  |  |  | 431 |  |
Ending balance |  | $ | 1,993 |  |  | $ | 4,673 |  |  | $ | 1,557 |  |  | $ | 2,602 |  |  | $ | - |  |  | $ | 10,825 |  |
The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2014 and December 31, 2013 (dollars in thousands):
|  | March 31, 2014
Allowance for loan losses |  | Commercial and Agricultural |  |  | Commercial Mortgages |  |  | Residential Mortgages |  |  | Consumer Loans |  |  | Unallocated |  |  | Total |
Ending allowance balance attributable to loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 549 |  |  | $ | 192 |  |  | $ | - |  |  | $ | 3 |  |  | $ | - |  |  | $ | 744 |
Collectively evaluated for impairment |  |  | 1,396 |  |  |  | 4,802 |  |  |  | 1,540 |  |  |  | 3,171 |  |  |  | - |  |  |  | 10,909 |
Loans acquired with deteriorated credit quality |  |  | - |  |  |  | 1,490 |  |  |  | 12 |  |  |  | - |  |  |  | - |  |  |  | 1,502 |
Total ending allowance balance |  | $ | 1,945 |  |  | $ | 6,484 |  |  | $ | 1,552 |  |  | $ | 3,174 |  |  | $ | - |  |  | $ | 13,155 |
|  | December 31, 2013
Allowance for loan losses |  | Commercial and Agricultural |  |  | Commercial Mortgages |  |  | Residential Mortgages |  |  | Consumer Loans |  |  | Unallocated |  |  | Total |
Ending allowance balance attributable to loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 576 |  |  | $ | 466 |  |  | $ | - |  |  | $ | 4 |  |  | $ | - |  |  | $ | 1,046 |
Collectively evaluated for impairment |  |  | 1,403 |  |  |  | 4,407 |  |  |  | 1,497 |  |  |  | 3,033 |  |  |  | - |  |  |  | 10,340 |
Loans acquired with deteriorated credit quality |  |  | - |  |  |  | 1,370 |  |  |  | 20 |  |  |  | - |  |  |  | - |  |  |  | 1,390 |
Total ending allowance balance |  | $ | 1,979 |  |  | $ | 6,243 |  |  | $ | 1,517 |  |  | $ | 3,037 |  |  | $ | - |  |  | $ | 12,776 |
|  | March 31, 2014 |
Loans: |  | Commercial and Agricultural |  |  | Commercial Mortgages |  |  | Residential Mortgages |  |  | Consumer Loans |  |  | Total |
Loans individually evaluated for impairment |  | $ | 2,208 |  |  | $ | 9,544 |  |  | $ | 114 |  |  | $ | 129 |  |  | $ | 11,995 | 1,
Loans collectively evaluated for impairment |  |  | 142,675 |  |  |  | 379,366 |  |  |  | 196,518 |  |  |  | 286,616 |  |  |  | 1,005,175 |
Loans acquired with deteriorated credit quality |  |  | 655 |  |  |  | 8,841 |  |  |  | 266 |  |  |  | - |  |  |  | 9,762 |
Total ending loans balance |  | $ | 145,538 |  |  | $ | 397,751 |  |  | $ | 196,898 |  |  | $ | 286,745 |  |  | $ | 1,026,932 |
|  | December 31, 2013 |
Loans: |  | Commercial and Agricultural |  |  | Commercial Mortgages |  |  | Residential Mortgages |  |  | Consumer Loans |  |  | Total |
Loans individually evaluated for impairment |  | $ | 2,946 |  |  | $ | 10,703 |  |  | $ | 117 |  |  | $ | 131 |  |  | $ | 13,897 |
Loans collectively evaluated for impairment |  |  | 142,108 |  |  |  | 354,636 |  |  |  | 196,147 |  |  |  | 281,979 |  |  |  | 974,870 |
Loans acquired with deteriorated credit quality |  |  | 678 |  |  |  | 8,757 |  |  |  | 261 |  |  |  | - |  |  |  | 9,696 |
Total ending loans balance |  | $ | 145,732 |  |  | $ | 374,096 |  |  | $ | 196,525 |  |  | $ | 282,110 |  |  | $ | 998,463 |
The following tables present loans individually evaluated for impairment recognized by class of loans as of March 31, 2014 and December 31, 2013, the average recorded investment and interest income recognized by class of loans as of the three-month periods ended March 31, 2014 and 2013 (dollars in thousands):
|  | March 31, 2014 |  | December 31, 2013 |
With no related allowance recorded: |  | Unpaid Principal Balance |  |  | Recorded Investment |  |  | Allowance for Loan Losses Allocated |  |  | Unpaid Principal Balance |  |  | Recorded Investment |  |  |  | Allowance for Loan Losses Allocated |  |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 1,398 |  |  | $ | 1,403 |  |  | $ | - |  |  | $ | 1,906 |  | $ | 1,909 |  |  | $ | - |  |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 2,286 |  |  |  | 2,273 |  |  |  | - |  |  |  | 2,329 |  |  | 2,319 |  |  |  | - |  |
Commercial mortgages other |  |  | 6,479 |  |  |  | 6,490 |  |  |  | - |  |  |  | 7,406 |  |  | 7,439 |  |  |  | - |  |
Residential mortgages |  |  | 114 |  |  |  | 114 |  |  |  | - |  |  |  | 117 |  |  | 117 |  |  |  | - |  |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines and loans |  |  | 69 |  |  |  | 71 |  |  |  | - |  |  |  | 71 |  |  | 73 |  |  |  | - |  |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 804 |  |  |  | 805 |  |  |  | 549 |  |  |  | 1,037 |  |  | 1,037 |  |  |  | 576 |  |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgages other |  |  | 783 |  |  |  | 781 |  |  |  | 192 |  |  |  | 951 |  |  | 945 |  |  |  | 466 |  |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines and loans |  |  | 57 |  |  |  | 58 |  |  |  | 3 |  |  |  | 58 |  |  | 58 |  |  |  | 4 |  |
Total |  | $ | 11,990 |  |  | $ | 11,995 |  |  | $ | 744 |  |  | $ | 13,875 |  | $ | 13,897 |  |  | $ | 1,046 |  |
|  |  | Three Months Ended March 31, 2014 |  |  | Three Months Ended March 31, 2013 |  |
With no related allowance recorded: |  |  | Average Recorded Investment |  |  | Interest Income Recognized (1) |  |  |  | Average Recorded Investment |  |  |  | Interest Income Recognized (1) |  |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 1,656 |  | $ | 14 |  |  | $ | 1,458 |  |  | $ | 17 |  |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 2,296 |  |  | 25 |  |  |  | 474 |  |  |  | - |  |
Commercial mortgages other |  |  | 7,005 |  |  | 63 |  |  |  | 5,583 |  |  |  | 53 |  |
Residential mortgages |  |  | 115 |  |  | - |  |  |  | 130 |  |  |  | - |  |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines & loans |  |  | 72 |  |  | 1 |  |  |  | 23 |  |  |  | - |  |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 921 |  |  | - |  |  |  | 387 |  |  |  | - |  |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgages other |  |  | 863 |  |  | - |  |  |  | 361 |  |  |  | - |  |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines and loans |  |  | 58 |  |  | 1 |  |  |  | 29 |  |  |  | - |  |
Direct consumer loans |  |  | - |  |  | - |  |  |  | 8 |  |  |  | - |  |
Total |  | $ | 12,986 |  | $ | 104 |  |  | $ | 8,453 |  |  | $ | 70 |  |
(1) | Cash basis interest income approximates interest income recognized.
The following tables present the recorded investment in past due and non-accrual status by class of loans as of March 31, 2014 and December 31, 2013 (dollars in thousands):
March 31, 2014 |  | Current |  |  | 30-89 Days Past Due |  |  | 90 Days or more Past Due and accruing |  |  |  | Loans acquired with deteriorated credit quality |  |  | Non-Accrual (1) |  |  | Total |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 142,750 |  |  | $ | 520 |  |  | $ | - |  |  | $ | 655 |  |  | $ | 1,078 |  |  | $ | 145,003 |
Agricultural |  |  | 535 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 535 |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 27,037 |  |  |  | - |  |  |  | 1,451 |  |  |  | 774 |  |  |  | 496 |  |  |  | 29,758 |
Commercial mortgages others |  |  | 356,618 |  |  |  | 1,002 |  |  |  | - |  |  |  | 8,067 |  |  |  | 2,306 |  |  |  | 367,993 |
Residential mortgages |  |  | 189,719 |  |  |  | 3,073 |  |  |  | - |  |  |  | 266 |  |  |  | 3,840 |  |  |  | 196,898 |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit cards |  |  | 1,568 |  |  |  | 8 |  |  |  | 7 |  |  |  | - |  |  |  | - |  |  |  | 1,583 |
Home equity lines and loans |  |  | 95,235 |  |  |  | 280 |  |  |  | - |  |  |  | - |  |  |  | 543 |  |  |  | 96,058 |
Indirect consumer loans |  |  | 169,838 |  |  |  | 1,091 |  |  |  | - |  |  |  | - |  |  |  | 293 |  |  |  | 171,222 |
Direct consumer loans |  |  | 17,822 |  |  |  | 49 |  |  |  | - |  |  |  | - |  |  |  | 11 |  |  |  | 17,882 |
Total |  | $ | 1,001,122 |  |  | $ | 6,023 |  |  | $ | 1,458 |  |  | $ | 9,762 |  |  | $ | 8,567 |  |  | $ | 1,026,932 |
(1) Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of March 31, 2014.
December 31, 2013 |  | Current |  |  | 30-89 Days Past Due |  |  | 90 Days or more Past Due and accruing |  |  |  | Loans acquired with deteriorated credit quality |  |  | Non-Accrual (1) |  |  | Total |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 143,100 |  |  | $ | 29 |  |  | $ | - |  |  | $ | 678 |  |  | $ | 1,348 |  |  | $ | 145,155 |
Agricultural |  |  | 577 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 577 |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | 24,742 |  |  |  | - |  |  |  | 1,454 |  |  |  | 774 |  |  |  | 540 |  |  |  | 27,510 |
Commercial mortgages other |  |  | 335,123 |  |  |  | 1,138 |  |  |  | - |  |  |  | 7,983 |  |  |  | 2,342 |  |  |  | 346,586 |
Residential mortgages |  |  | 187,448 |  |  |  | 5,458 |  |  |  | - | ` |  |  | 261 |  |  |  | 3,358 |  |  |  | 196,525 |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit cards |  |  | 1,729 |  |  |  | 9 |  |  |  | 19 |  |  |  | - |  |  |  | - |  |  |  | 1,757 |
Home equity lines and loans |  |  | 95,349 |  |  |  | 150 |  |  |  | - |  |  |  | - |  |  |  | 635 |  |  |  | 96,134 |
Indirect consumer loans |  |  | 163,810 |  |  |  | 1,235 |  |  |  | - |  |  |  | - |  |  |  | 249 |  |  |  | 165,294 |
Direct consumer loans |  |  | 18,830 |  |  |  | 50 |  |  |  | - |  |  |  | - |  |  |  | 45 |  |  |  | 18,925 |
Total |  | $ | 970,708 |  |  | $ | 8,069 |  |  | $ | 1,473 |  |  | $ | 9,696 |  |  | $ | 8,517 |  |  | $ | 998,463 |
(1) Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of December 31, 2013. Troubled Debt Restructurings: As of March 31, 2014 and December 31, 2013, the Corporation has a recorded investment in troubled debt restructurings of $7.3 million and $7.9 million, respectively. There were specific reserves of $0.2 million and $0.3 million allocated for troubled debt restructurings at March 31, 2014 and December 31, 2013, respectively. As of March 31, 2014, troubled debt restructurings totaling $6.5 million were accruing interest under the modified terms and $0.8 million were on non-accrual status. As of December 31, 2013, troubled debt restructurings totaling $6.8 million were accruing interest under the modified terms and $1.1 million were on non-accrual status. The Corporation has not committed to lend additional amounts as of March 31, 2014 to customers with outstanding loans that are classified as troubled debt restructurings. The Corporation had committed additional amounts totaling up to $0.2 million as of December 31, 2013 to customers with outstanding loans that are classified as troubled debt restructurings. During the three months ended March 31, 2014 and 2013, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: reduced scheduled payments for greater than three months or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk. The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended March 31, 2014 and March 31, 2013 (dollars in thousands):
March 31, 2014 |  | Number of Loans |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |
Troubled debt restructurings: |  |  |  |  |  |  |  |  |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 1 |  |  | $ | 503 |  |  | $ | 503 |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgages |  |  | 2 |  |  |  | 367 |  |  |  | 323 |
Total |  |  | 3 |  |  | $ | 870 |  |  | $ | 826 |
March 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |
Troubled debt restructurings: |  |  |  |  |  |  |  |  |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 2 |  |  | $ | 431 |  |  | $ | 431 |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines and loans |  |  | 2 |  |  | $ | 104 |  |  |  | 104 |
Total |  |  | 4 |  |  | $ | 535 |  |  | $ | 535 |
The troubled debt restructurings described above did not increase the allowance for loan losses and resulted in less than $0.1 million in charge offs during the three months ended March 31, 2014. The troubled debt restructurings described above increased the allowance for loan losses by less than $0.1 million and resulted in no charge offs during the three months ended March 31, 2013. There were no payment defaults on any loans previously modified as troubled debt restructurings during the three months ending March 31, 2014 or March 31, 2013, within twelve months following the modification. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. Credit Quality Indicators The Corporation establishes a risk rating at origination for all commercial loans. The main factors considered in assigning risk ratings include, but are not limited to: historic and future debt service coverage, collateral position, operating performance, liquidity, leverage, payment history, management ability, and the customer’s industry. Commercial relationship managers monitor all loans in their respective portfolios for any changes in the borrower’s ability to service their debt and affirm the risk ratings for the loans at least annually. For the retail loans, which include lines of credit, installment, mortgage, and home equity loans, once a loan is properly approved and closed, the Corporation evaluates credit quality based upon loan repayment. The Corporation uses the risk rating system to identify criticized and classified loans. Commercial relationships within the criticized and classified risk ratings are analyzed quarterly. The Corporation uses the following definitions for criticized and classified loans (which are consistent with regulatory guidelines): Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date. Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capability of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are included in groups of homogeneous loans. Based on the analyses performed as of March 31, 2014 and December 31, 2013, the risk category of the recorded investment of loans by class of loans is as follows (dollars in thousands):
| March 31, 2014 |  |  |
|  | Not Rated |  |  | Pass |  |  | Loans acquired with deteriorated credit quality |  |  | Special Mention |  |  | Substandard |  |  | Doubtful |  |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | - |  |  | $ | 134,207 |  |  | $ | 655 |  |  | $ | 6,068 |  |  | $ | 3,268 |  |  | $ | 805 |  |
Agricultural |  |  | - |  |  |  | 535 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | - |  |  |  | 25,101 |  |  |  | 774 |  |  |  | 3,061 |  |  |  | 822 |  |  |  | - |  |
Commercial mortgages other |  |  | - |  |  |  | 333,719 |  |  |  | 8,067 |  |  |  | 16,394 |  |  |  | 9,753 |  |  |  | 60 |  |
Residential mortgages |  |  | 192,792 |  |  |  | - |  |  |  | 266 |  |  |  | - |  |  |  | 3,840 |  |  |  | - |  |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit cards |  |  | 1,583 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |
Home equity lines and loans |  |  | 95,439 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 619 |  |  |  | - |  |
Indirect consumer loans |  |  | 170,920 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 302 |  |  |  | - |  |
Direct consumer loans |  |  | 17,871 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 11 |  |  |  | - |  |
Total |  | $ | 478,605 |  |  | $ | 493,562 |  |  | $ | 9,762 |  |  | $ | 25,523 |  |  | $ | 18,615 |  |  | $ | 865 |  |
| December 31, 2013 |  |  |
|  | Not Rated |  |  | Pass |  |  | Loans acquired with deteriorated credit quality |  |  | Special Mention |  |  | Substandard |  |  | Doubtful |  |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | - |  |  | $ | 133,615 |  |  | $ | 678 |  |  | $ | 5,117 |  |  | $ | 4,724 |  |  | $ | 1,021 |  |
Agricultural |  |  | - |  |  |  | 577 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction |  |  | - |  |  |  | 23,087 |  |  |  | 774 |  |  |  | 2,783 |  |  |  | 866 |  |  |  | - |  |
Commercial mortgages other |  |  | - |  |  |  | 313,956 |  |  |  | 7,983 |  |  |  | 13,611 |  |  |  | 11,036 |  |  |  | - |  |
Residential mortgages |  |  | 192,995 |  |  |  | - |  |  |  | 261 |  |  |  | - |  |  |  | 3,269 |  |  |  | - |  |
Consumer loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit cards |  |  | 1,757 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |
Home equity lines and loans |  |  | 95,422 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 712 |  |  |  | - |  |
Indirect consumer loans |  |  | 165,045 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 249 |  |  |  | - |  |
Direct consumer loans |  |  | 18,880 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 45 |  |  |  | - |  |
Total |  | $ | 474,099 |  |  | $ | 471,235 |  |  | $ | 9,696 |  |  | $ | 21,511 |  |  | $ | 20,901 |  |  | $ | 1,021 |  |
The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in residential and consumer loans based on payment activity as of March 31, 2014 and December 31, 2013 (dollars in thousands):
|  | March 31, 2014
|  |  |  |  | Consumer Loans |
|  | Residential Mortgages |  |  | Credit Card |  |  | Home Equity Lines and Loans |  |  | Indirect Consumer Loans |  |  | Other Direct Consumer Loans |
Performing |  | $ | 193,058 |  |  | $ | 1,576 |  |  | $ | 95,515 |  |  | $ | 170,929 |  |  | $ | 17,871 |
Non-Performing |  |  | 3,840 |  |  |  | 7 |  |  |  | 543 |  |  |  | 293 |  |  |  | 11 |
Total |  | $ | 196,898 |  |  | $ | 1,583 |  |  | $ | 96,058 |  |  | $ | 171,222 |  |  | $ | 17,882 |
|  | December 31, 2013
|  |  |  |  | Consumer Loans |
|  | Residential Mortgages |  |  | Credit Card |  |  | Home Equity Lines and Loans |  |  | Indirect Consumer Loans |  |  | Other Direct Consumer Loans |
Performing |  | $ | 193,167 |  |  | $ | 1,738 |  |  | $ | 95,499 |  |  | $ | 165,045 |  |  | $ | 18,880 |
Non-Performing |  |  | 3,358 |  |  |  | 19 |  |  |  | 635 |  |  |  | 249 |  |  |  | 45 |
|  | $ | 196,525 |  |  | $ | 1,757 |  |  | $ | 96,134 |  |  | $ | 165,294 |  |  | $ | 18,925 |
At the time of the merger with Fort Orange Financial Corp., the Corporation identified certain loans with evidence of deteriorated credit quality, and the probability that the Corporation would be unable to collect all contractually required payments from the borrower. These loans are classified as PCI loans. The Corporation adjusted its estimates of future expected losses, cash flows, and renewal assumptions on the PCI loans during the current year. These adjustments were made for changes in expected cash flows due to loans refinanced beyond original maturity dates, impairments recognized subsequent to the acquisition, advances made for taxes or insurance to protect collateral held and payments received in excess of amounts originally expected. The table below summarizes the changes in total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and carrying value of the PCI loans from January 1, 2014 to March 31, 2014 (dollars in thousands):
|  | Balance at December 31, 2013 |  |  | Income Accretion |  |  | All Other Adjustments |  |  | Balance at March 31, 2014 |
Contractually required principal and interest |  | $ | 11,230 |  |  | $ | - |  |  | $ | (157 | ) |  | $ | 11,073 |
Contractual cash flows not expected to be collected (nonaccretable discount) |  |  | (543 | ) |  |  | - |  |  |  | 108 |  |  |  | (435 | )
Cash flows expected to be collected |  |  | 10,687 |  |  |  | - |  |  |  | (49 | ) |  |  | 10,638 |
Interest component of expected cash flows (accretable yield) |  |  | (991 | ) |  |  | 199 |  |  |  | (84 | ) |  |  | (876 | )
Fair value of loans acquired with deteriorating credit quality |  | $ | 9,696 |  |  | $ | 199 |  |  | $ | (133 | ) |  | $ | 9,762 |

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