LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)

6 Months Ended

Jun. 30, 2015

LOANS AND ALLOWANCE FOR LOAN LOSSES [Abstract]

Composition of the loan portfolio by type

The composition of the loan portfolio, net of deferred origination fees and cost, and unearned income is summarized as follows (in thousands):

	June 30, 2015		December 31, 2014
Commercial and agricultural:
Commercial and industrial	$	179,880	$	165,385
Agricultural		1,832		1,021
Commercial mortgages:
Construction		37,557		54,831
Commercial mortgages, other		446,034		397,762
Residential mortgages		198,469		196,809
Consumer loans:
Credit cards		1,521		1,654
Home equity lines and loans		100,701		99,354
Indirect consumer loans		164,890		184,763
Direct consumer loans		19,522		19,995
Total loans, net of deferred loan fees	$	1,150,406	$	1,121,574
Interest receivable on loans		2,693		2,780
Total recorded investment in loans	$	1,153,099	$	1,124,354

Allowance for loan losses by portfolio segment

The following tables present the activity in the allowance for loan losses by portfolio segment for the three and six month periods ended June 30, 2015 and 2014 (in thousands):

	Three Months Ended
	June 30, 2015
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages			Residential Mortgages			Consumer Loans			Total
Beginning balance:	$	1,671	$	6,530		$	1,594		$	4,097		$	13,892
Charge-offs:		-		(28	)		(10	)		(245	)		(283	)
Recoveries:		23		17			-			120			160
Net recoveries (charge-offs)		23		(11	)		(10	)		(125	)		(123	)
Provision		131		106			(39	)		61			259
Ending balance	$	1,825	$	6,625		$	1,545		$	4,033		$	14,028

	Three Months Ended
	June 30, 2014
Allowance for loan losses	Commercial and Agricultural			Commercial Mortgages			Residential Mortgages			Consumer Loans			Total
Beginning balance:	$	1,945		$	6,484		$	1,552		$	3,174		$	13,155
Charge-offs:		(300	)		(315	)		-			(308	)		(923	)
Recoveries:		100			45			28			124			297
Net recoveries (charge-offs)		(200	)		(270	)		28			(184	)		(626	)
Provision		4			698			(82	)		483			1,103
Ending balance	$	1,749		$	6,912		$	1,498		$	3,473		$	13,632

	Six Months Ended
	June 30, 2015
Allowance for loan losses	Commercial and Agricultural		Commercial Mortgages			Residential Mortgages			Consumer Loans			Total
Beginning balance:	$	1,460	$	6,326		$	1,572		$	4,328		$	13,686
Charge-offs:		-		(28	)		(32	)		(613	)		(673	)
Recoveries:		38		84			-			244			366
Net recoveries (charge-offs)		38		56			(32	)		(369	)		(307	)
Provision		327		243			5			74			649
Ending balance	$	1,825	$	6,625		$	1,545		$	4,033		$	14,028

	Six Months Ended
	June 30, 2014
Allowance for loan losses	Commercial and Agricultural			Commercial Mortgages			Residential Mortgages			Consumer Loans			Total
Beginning balance:	$	1,979		$	6,243		$	1,517		$	3,037		$	12,776
Charge-offs:		(355	)		(358	)		(7	)		(776	)		(1,496	)
Recoveries:		193			83			28			307			611
Net recoveries (charge-offs)		(162	)		(275	)		21			(469	)		(885	)
Provision		(68	)		944			(40	)		905			1,741
Ending balance	$	1,749		$	6,912		$	1,498		$	3,473		$	13,632

Allowance for loan losses and the recorded investment in loans based on impairment method

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 June 30, 2015 and December 31, 2014 (in thousands):

	June 30, 2015
Allowance for loan losses:	Commercial and Agricultural			Commercial Mortgages			Residential Mortgages			Consumer Loans			Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment		$	244		$	1,289		$	-		$	-		$	1,533
Collectively evaluated for impairment			1,581			5,278			1,514			4,033			12,406
Loans acquired with deteriorated credit quality			-			58			31			-			89
Total ending allowance balance		$	1,825		$	6,625		$	1,545		$	4,033		$	14,028

	December 31, 2014
Allowance for loan losses:	Commercial and Agricultural			Commercial Mortgages			Residential Mortgages			Consumer Loans			Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment		$	89		$	1,145		$	-		$	1		$	1,235
Collectively evaluated for impairment			1,335			5,145			1,550			4,327			12,357
Loans acquired with deteriorated credit quality			36			36			22			-			94
Total ending allowance balance		$	1,460		$	6,326		$	1,572		$	4,328		$	13,686

	June 30, 2015
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	1,508	$	13,071	$	243	$	481	$	15,303
Loans collectively evaluated for impairment		180,627		469,759		198,457		286,809		1,135,652
Loans acquired with deteriorated credit quality		-		1,883		261		-		2,144
Total ending loans balance	$	182,135	$	484,713	$	198,961	$	287,290	$	1,153,099

	December 31, 2014
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	1,452	$	13,712	$	254	$	486	$	15,904
Loans collectively evaluated for impairment		164,748		438,246		196,783		306,042		1,105,819
Loans acquired with deteriorated credit quality		620		1,761		250		-		2,631
Total ending loans balance	$	166,820	$	453,719	$	197,287	$	306,528	$	1,124,354

Summary of impaired financing receivables

The following tables present loans individually evaluated for impairment recognized by class of loans as of June 30, 2015 and December 31, 2014, the average recorded investment and interest income recognized by class of loans as of the three and six month periods ended June 30, 2015 and 2014 (in thousands):

	June 30, 2015						December 31, 2014
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	$	1,260	$	1,263	$	-	$	1,359	$	1,364	$	-
Commercial mortgages:
Construction		445		446		-		1,927		1,910		-
Commercial mortgages, other		7,766		7,679		-		7,803		7,708		-
Residential mortgages		243		243		-		253		253		-
Consumer loans:
Home equity lines and loans		478		481		-		429		432		-
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial		244		245		244		89		89		89
Commercial mortgages:
Commercial mortgages, other		4,995		4,946		1,289		4,210		4,094		1,145
Consumer loans:
Home equity lines and loans		-		-		-		54		54		1
Total	$	15,431	$	15,303	$	1,533	$	16,124	$	15,904	$	1,235

	Three Months Ended June 30, 2015				Three Months Ended June 30, 2014				Six Months Ended June 30, 2015				Six Months Ended June 30, 2014
With no related allowance recorded:	Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	1,467	$	17	$	1,386	$	16	$	1,433	$	32	$	1,566	$	30
Commercial mortgages:
Construction		1,172		4		2,101		25		1,418		29		2,231		51
Commercial mortgages, other		7,636		63		6,489		66		7,660		126		6,806		129
Residential mortgages		246		1		112		-		249		2		114		-
Consumer loans:
Home equity lines & loans		482		6		71		1		465		12		72		1
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial		274		-		512		-		212		3		784		-
Commercial mortgages:
Commercial mortgages, other		4,611		24		1,010		-		4,438		47		912		-
Consumer loans:
Home equity lines and loans		-		-		57		1		18		-		58		2
Total	$	15,888	$	115	$	11,738	$	109	$	15,893	$	136	$	12,543	$	213

(1)	Cash basis interest income approximates interest income recognized.

Recorded investment in past due and non-accrual status by class of loans

The following tables present the recorded investment in past due and non-accrual status by class of loans as of June 30, 2015 and December 31, 2014 (in thousands):

June 30, 2015	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	$	179,913	$	120	$	11	$	-	$	254	$	180,298
Agricultural		1,837		-		-		-		-		1,837
Commercial mortgages:
Construction		37,498		-		-		-		146		37,644
Commercial mortgages, other		434,106		3,313		-		1,883		7,767		447,069
Residential mortgages		193,301		1,857		-		261		3,542		198,961
Consumer loans:
Credit cards		1,472		33		16		-		-		1,521
Home equity lines and loans		99,974		124		-		-		840		100,938
Indirect consumer loans		163,789		1,164		-		-		292		165,245
Direct consumer loans		19,500		65		-		-		21		19,586
Total	$	1,131,390	$	6,676	$	27	$	2,144	$	12,862	$	1,153,099

(1) Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of June 30, 2015.

December 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	$	164,109	$	756	$	-	$	620	$	312	$	165,797
Agricultural		1,023		-		-		-		-		1,023
Commercial mortgages:
Construction		53,371		-		1,446		-		150		54,967
Commercial mortgages, other		391,096		3,064		-		1,761		2,831		398,752
Residential mortgages		191,089		2,333		-		250		3,615		197,287
Consumer loans:
Credit cards		1,641		5		8		-		-		1,654
Home equity lines and loans		98,340		736		-		-		515		99,591
Indirect consumer loans		183,103		1,789		-		-		325		185,217
Direct consumer loans		19,988		48		-		-		30		20,066
Total	$	1,103,760	$	8,731	$	1,454	$	2,631	$	7,778	$	1,124,354

(1) Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of December 31, 2014.

Loans by class modified as troubled debt restructurings

The following table presents loans by class modified as TDRs that occurred during the three months ended June 30, 2015 (in thousands):

June 30, 2015	Number of Loans		Pre-Modification Outstanding Recorded Investment			Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial mortgages:
Commercial mortgages		1			110			110
Total		1		$	110		$	110

The following table presents loans by class modified as TDRs that occurred during the six months ended June 30, 2015 and 2014 (in thousands):

June 30, 2015	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial		1	$	477	$	477
Commercial mortgages:
Commercial mortgages		1		110		110
Total		2	$	587	$	587

June 30, 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

Risk category of the recorded investment of loans by class of loans

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 June 30, 2015 and December 31, 2014, the risk category of the recorded investment of loans by class of loans is as follows (in thousands):

	June 30, 2015
	Not Rated		Pass		Loans acquired with deteriorated credit quality		Special Mention		Substandard		Doubtful		Total
Commercial and agricultural:
Commercial and industrial	$	-	$	174,500	$	-	$	3,696	$	1,938	$	164	$	180,298
Agricultural		-		1,837		-		-		-		-		1,837
Commercial mortgages:
Construction		-		37,198		-		300		146		-		37,644
Commercial mortgages		-		415,280		1,883		12,486		13,296		4,124		447,069
Residential mortgages		194,926		-		261		-		3,774		-		198,961
Consumer loans
Credit cards		1,521		-		-		-		-		-		1,521
Home equity lines and loans		100,093		-		-		-		845		-		100,938
Indirect consumer loans		164,946		-		-		-		299		-		165,245
Direct consumer loans		19,565		-		-		-		21		-		19,586
Total	$	481,051	$	628,815	$	2,144	$	16,482	$	20,319	$	4,288	$	1,153,099

	December 31, 2014
	Not Rated		Pass		Loans acquired with deteriorated credit quality		Special Mention		Substandard		Doubtful		Total
Commercial and agricultural:
Commercial and industrial	$	-	$	158,140	$	620	$	3,695	$	3,306	$	36	$	165,797
Agricultural		-		1,023		-		-		-		-		1,023
Commercial mortgages:
Construction		-		51,525		-		3,292		150		-		54,967
Commercial mortgages		-		365,448		1,761		20,871		10,266		406		398,752
Residential mortgages		193,422		-		250		-		3,615		-		197,287
Consumer loans
Credit cards		1,654		-		-		-		-		-		1,654
Home equity lines and loans		99,076		-		-		-		515		-		99,591
Indirect consumer loans		184,940		-		-		-		277		-		185,217
Direct consumer loans		20,045		-		-		-		21		-		20,066
Total	$	499,137	$	576,136	$	2,631	$	27,858	$	18,150	$	442	$	1,124,354

Recorded investment in residential and consumer loans based on payment activity

The following table presents the recorded investment in residential and consumer loans based on payment activity as of June 30, 2015 and December 31, 2014 (in thousands):

	June 30, 2015
			Consumer Loans
	Residential Mortgages		Credit Card		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	195,419	$	1,521	$	100,098	$	164,953	$	19,565
Non-Performing		3,542		-		840		292		21
	$	198,961	$	1,521	$	100,938	$	165,245	$	19,586

	December 31, 2014
			Consumer Loans
	Residential Mortgages		Credit Card		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	193,672	$	1,654	$	99,076	$	184,892	$	20,036
Non-Performing		3,615		-		515		325		30
	$	197,287	$	1,654	$	99,591	$	185,217	$	20,066

Summary of changes in contractually required principal and interest on loans acquired

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 April 1, 2015 to June 30, 2015 and January 1, 2015 to June 30, 2015 (in thousands):

Three months ended June 30, 2015	Balance at March 31, 2015			Income Accretion		All Other Adjustments			Balance at June 30, 2015
Contractually required principal and interest	$	2,945		$	-	$	91		$	3,036
Contractual cash flows not expected to be collected (nonaccretable discount)		(595	)		-		27			(568	)
Cash flows expected to be collected		2,350			-		118			2,468
Interest component of expected cash flows (accretable yield)		(333	)		36		(27	)		(324	)
Fair value of loans acquired with deteriorating credit quality	$	2,017		$	36	$	91		$	2,144

Six months ended June 30, 2015	Balance at December 31, 2014			Income Accretion		All Other Adjustments			Balance at June 30, 2015
Contractually required principal and interest	$	3,621		$	-	$	(585	)	$	3,036
Contractual cash flows not expected to be collected (nonaccretable discount)		(570	)		-		2			(568	)
Cash flows expected to be collected		3,051			-		(583	)		2,468
Interest component of expected cash flows (accretable yield)		(420	)		99		(3	)		(324	)
Fair value of loans acquired with deteriorating credit quality	$	2,631		$	99	$	(586	)	$	2,144