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LOANS AND ALLOWANCE FOR LOAN LOSSES | 9 Months Ended
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Sep. 30, 2015
Loans and Leases Receivable Disclosure [Abstract] |
LOANS AND ALLOWANCE FOR LOAN LOSSES | 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 (in thousands):
| September 30, 2015 |  | December 31, 2014
Commercial and agricultural: |  |  |
Commercial and industrial | $ | 175,098 |  |  | $ | 165,385 |
Agricultural | 1,043 |  |  | 1,021 |
Commercial mortgages: |  |  |  |  |
Construction | 45,579 |  |  | 54,831 |
Commercial mortgages, other | 442,785 |  |  | 397,762 |
Residential mortgages | 197,506 |  |  | 196,809 |
Consumer loans: |  |  |  |  |
Credit cards | 1,423 |  |  | 1,654 |
Home equity lines and loans | 102,085 |  |  | 99,354 |
Indirect consumer loans | 157,059 |  |  | 184,763 |
Direct consumer loans | 19,359 |  |  | 19,995 |
Total loans, net of deferred loan fees | $ | 1,141,937 |  |  | $ | 1,121,574 |
Interest receivable on loans | 2,694 |  |  | 2,780 |
Total recorded investment in loans | $ | 1,144,631 |  |  | $ | 1,124,354 |
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 and nine month periods ended September 30, 2015 and 2014 (in thousands):
| Three Months Ended September 30, 2015
Allowance for loan losses | Commercial and Agricultural |  | Commercial Mortgages |  | Residential Mortgages |  | Consumer Loans |  | Total
Beginning balance: | $ | 1,825 |  |  | $ | 6,625 |  |  | $ | 1,545 |  |  | $ | 4,033 |  |  | $ | 14,028 |
Charge-offs: | (113 | ) |  | (1 | ) |  | — |  |  | (304 | ) |  | (418 | )
Recoveries: | 26 |  |  | 17 |  |  | — |  |  | 62 |  |  | 105 |
Net recoveries (charge-offs) | (87 | ) |  | 16 |  |  | — |  |  | (242 | ) |  | (313 | )
Provision | (162 | ) |  | 326 |  |  | 7 |  |  | 136 |  |  | 307 |
Ending balance | $ | 1,576 |  |  | $ | 6,967 |  |  | $ | 1,552 |  |  | $ | 3,927 |  |  | $ | 14,022 |
| Three Months Ended September 30, 2014
Allowance for loan losses | Commercial and Agricultural |  | Commercial Mortgages |  | Residential Mortgages |  | Consumer Loans |  | Total
Beginning balance: | $ | 1,749 |  |  | $ | 6,912 |  |  | $ | 1,498 |  |  | $ | 3,473 |  |  | $ | 13,632 |
Charge-offs: | (60 | ) |  | (878 | ) |  | (90 | ) |  | (415 | ) |  | (1,443 | )
Recoveries: | 138 |  |  | 35 |  |  | — |  |  | 200 |  |  | 373 |
Net recoveries (charge-offs) | 78 |  |  | (843 | ) |  | (90 | ) |  | (215 | ) |  | (1,070 | )
Provision | (115 | ) |  | 256 |  |  | 24 |  |  | 424 |  |  | 589 |
Ending balance | $ | 1,712 |  |  | $ | 6,325 |  |  | $ | 1,432 |  |  | $ | 3,682 |  |  | $ | 13,151 |
| Nine Months Ended September 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: | (113 | ) |  | (29 | ) |  | (32 | ) |  | (917 | ) |  | (1,091 | )
Recoveries: | 64 |  |  | 101 |  |  | — |  |  | 306 |  |  | 471 |
Net recoveries (charge-offs) | (49 | ) |  | 72 |  |  | (32 | ) |  | (611 | ) |  | (620 | )
Provision | 165 |  |  | 569 |  |  | 12 |  |  | 210 |  |  | 956 |
Ending balance | $ | 1,576 |  |  | $ | 6,967 |  |  | $ | 1,552 |  |  | $ | 3,927 |  |  | $ | 14,022 |
| Nine Months Ended September 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: | (415 | ) |  | (1,236 | ) |  | (97 | ) |  | (1,191 | ) |  | (2,939 | )
Recoveries: | 331 |  |  | 118 |  |  | 28 |  |  | 507 |  |  | 984 |
Net recoveries (charge-offs) | (84 | ) |  | (1,118 | ) |  | (69 | ) |  | (684 | ) |  | (1,955 | )
Provision | (183 | ) |  | 1,200 |  |  | (16 | ) |  | 1,329 |  |  | 2,330 |
Ending balance | $ | 1,712 |  |  | $ | 6,325 |  |  | $ | 1,432 |  |  | $ | 3,682 |  |  | $ | 13,151 |
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 September 30, 2015 and December 31, 2014 (in thousands):
| September 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 | $ | 85 |  |  | $ | 1,525 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,610 |
Collectively evaluated for impairment | 1,491 |  |  | 5,383 |  |  | 1,521 |  |  | 3,927 |  |  | 12,322 |
Loans acquired with deteriorated credit quality | — |  |  | 59 |  |  | 31 |  |  | — |  |  | 90 |
Total ending allowance balance | $ | 1,576 |  |  | $ | 6,967 |  |  | $ | 1,552 |  |  | $ | 3,927 |  |  | $ | 14,022 |
| 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 |
| September 30, 2015
Loans: | Commercial and Agricultural |  | Commercial Mortgages |  | Residential Mortgages |  | Consumer Loans |  | Total
Loans individually evaluated for impairment | $ | 1,088 |  |  | $ | 12,796 |  |  | $ | 239 |  |  | $ | 477 |  |  | $ | 14,600 |
Loans collectively evaluated for impairment | 175,461 |  |  | 474,848 |  |  | 197,504 |  |  | 280,104 |  |  | 1,127,917 |
Loans acquired with deteriorated credit quality | — |  |  | 1,849 |  |  | 265 |  |  | — |  |  | 2,114 |
Total ending loans balance | $ | 176,549 |  |  | $ | 489,493 |  |  | $ | 198,008 |  |  | $ | 280,581 |  |  | $ | 1,144,631 |
| 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 |
The following tables present loans individually evaluated for impairment recognized by class of loans as of September 30, 2015 and December 31, 2014, the average recorded investment and interest income recognized by class of loans as of the three and nine month periods ended September 30, 2015 and 2014 (in thousands):
| September 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 | $ | 1,001 |  |  | $ | 1,003 |  |  | $ | — |  |  | $ | 1,359 |  |  | $ | 1,364 |  |  | $ | — |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction | 357 |  |  | 358 |  |  | — |  |  | 1,927 |  |  | 1,910 |  |  | — |
Commercial mortgages, other | 7,520 |  |  | 7,433 |  |  | — |  |  | 7,803 |  |  | 7,708 |  |  | — |
Residential mortgages | 238 |  |  | 239 |  |  | — |  |  | 253 |  |  | 253 |  |  | — |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines and loans | 474 |  |  | 477 |  |  | — |  |  | 429 |  |  | 432 |  |  | — |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial | 85 |  |  | 85 |  |  | 85 |  |  | 89 |  |  | 89 |  |  | 89 |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgages, other | 5,055 |  |  | 5,005 |  |  | 1,525 |  |  | 4,210 |  |  | 4,094 |  |  | 1,145 |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines and loans | — |  |  | — |  |  | — |  |  | 54 |  |  | 54 |  |  | 1 |
Total | $ | 14,730 |  |  | $ | 14,600 |  |  | $ | 1,610 |  |  | $ | 16,124 |  |  | $ | 15,904 |  |  | $ | 1,235 |
| Three Months Ended September 30, 2015 |  | Three Months Ended September 30, 2014 |  | Nine Months Ended September 30, 2015 |  | Nine Months Ended September 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 | $ | 1,133 |  |  | $ | 15 |  |  | $ | 1,309 |  |  | $ | 11 |  |  | $ | 1,325 |  |  | $ | 47 |  |  | $ | 1,566 |  |  | $ | 26 |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction | 402 |  |  | 4 |  |  | 1,924 |  |  | 26 |  |  | 1,153 |  |  | 33 |  |  | 2,231 |  |  | 76 |
Commercial mortgages, other | 7,556 |  |  | 70 |  |  | 7,909 |  |  | 82 |  |  | 7,765 |  |  | 196 |  |  | 6,806 |  |  | 211 |
Residential mortgages | 241 |  |  | 1 |  |  | 110 |  |  | — |  |  | 246 |  |  | 3 |  |  | 114 |  |  | — |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines & loans | 479 |  |  | 6 |  |  | 69 |  |  | 1 |  |  | 468 |  |  | 18 |  |  | 72 |  |  | 2 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial | 165 |  |  | — |  |  | 144 |  |  | — |  |  | 180 |  |  | 3 |  |  | 784 |  |  | — |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgages, other | 4,975 |  |  | 1 |  |  | 1,233 |  |  | — |  |  | 4,418 |  |  | 48 |  |  | 912 |  |  | — |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines and loans | — |  |  | — |  |  | 56 |  |  | 1 |  |  | 13 |  |  | — |  |  | 58 |  |  | 3 |
Total | $ | 14,951 |  |  | $ | 97 |  |  | $ | 12,754 |  |  | $ | 121 |  |  | $ | 15,568 |  |  | $ | 348 |  |  | $ | 12,543 |  |  | $ | 318 |
(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 September 30, 2015 and December 31, 2014 (in thousands):
September 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 | $ | 175,397 |  |  | $ | 11 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 94 |  |  | $ | 175,503 |
Agricultural | 1,046 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,046 |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction | 45,620 |  |  | — |  |  | — |  |  | — |  |  | 64 |  |  | 45,684 |
Commercial mortgages, other | 434,476 |  |  | 272 |  |  | — |  |  | 1,849 |  |  | 7,212 |  |  | 443,809 |
Residential mortgages | 192,719 |  |  | 1,124 |  |  | — |  |  | 265 |  |  | 3,900 |  |  | 198,008 |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit cards | 1,383 |  |  | 27 |  |  | 13 |  |  | — |  |  | — |  |  | 1,423 |
Home equity lines and loans | 101,188 |  |  | 335 |  |  | — |  |  | — |  |  | 811 |  |  | 102,334 |
Indirect consumer loans | 155,327 |  |  | 1,804 |  |  | — |  |  | — |  |  | 269 |  |  | 157,400 |
Direct consumer loans | 19,325 |  |  | 81 |  |  | — |  |  | — |  |  | 18 |  |  | 19,424 |
Total | $ | 1,126,481 |  |  | $ | 3,654 |  |  | $ | 14 |  |  | $ | 2,114 |  |  | $ | 12,368 |  |  | $ | 1,144,631 |
(1) Includes all loans on non-accrual status regardless of the number of days such loans were past due as of September 30, 2015. The past due status of non-accrual loans as of September 30, 2015 were as follows: $3.0 million in current, $3.5 million in 30-89 days past due, and $5.9 million in 90 days or more past due.
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 past due as of December 31, 2014. The past due status of non-accrual loans as of December 31, 2014 were as follows: $2.9 million in current, $1.7 million in 30-89 days past due, and $3.2 million in 90 days or more past due. Troubled Debt Restructurings: A modification of a loan may result in classification as a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession. The Corporation offers various types of modifications which may involve a change in the schedule of payments, a reduction in the interest rate, an extension of the maturity date, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, requesting additional collateral, releasing collateral for consideration, substituting or adding a new borrower or guarantor, a permanent reduction of the recorded investment in the loan or a permanent reduction of the interest on the loan. As of September 30, 2015 and December 31, 2014, the Corporation has a recorded investment in TDRs of $9.4 million and $9.7 million, respectively. There were specific reserves of $0.5 million and $0.3 million allocated for TDRs at September 30, 2015 and December 31, 2014, respectively. As of September 30, 2015, TDRs totaling $7.1 million were accruing interest under the modified terms and $2.3 million were on non-accrual status. As of December 31, 2014, TDRs totaling $8.7 million were accruing interest under the modified terms and $1.0 million were on non-accrual status. The Corporation had committed additional amounts up to $0.6 million as of September 30, 2015 and less than $0.1 million as of December 31, 2014, to customers with outstanding loans that are classified as TDRs. During the three and nine months ended September 30, 2015 and 2014, the terms of certain loans were modified as TDRs. 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 TDRs that occurred during the three months ended September 30, 2015 and 2014 (in thousands):
September 30, 2015 | Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
Troubled debt restructurings: |  |  |  |  |
Commercial mortgages: |  |  |  |  |
Commercial mortgages | 1 |  |  | $ | 432 |  |  | $ | 432 |
Total | 1 |  |  | $ | 432 |  |  | $ | 432 |
September 30, 2014 | Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
Troubled debt restructurings: |  |  |  |  |
Commercial and agricultural: |  |  |  |  |
Commercial and industrial | 2 |  |  | $ | 405 |  |  | $ | 405 |
Commercial mortgages: |  |  |  |  |  |  |  |
Commercial mortgages | 1 |  |  | 1,869 |  |  | 1,869 |
Total | 3 |  |  | $ | 2,274 |  |  | $ | 2,274 |
The TDRs described above did not increase the allowance for loan losses and resulted in no charge-offs during the three months ended September 30, 2015 and 2014, respectively. The following table presents loans by class modified as TDRs that occurred during the nine months ended September 30, 2015 and 2014 (in thousands):
September 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 | 2 |  |  | 542 |  |  | 542 |
Total | 3 |  |  | $ | 1,019 |  |  | $ | 1,019 |
September 30, 2014 | Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
Troubled debt restructurings: |  |  |  |  |
Commercial and agricultural: |  |  |  |  |
Commercial and industrial | 3 |  |  | $ | 908 |  |  | $ | 908 |
Commercial mortgages: |  |  |  |  |  |  |  |
Commercial mortgages | 3 |  |  | 2,236 |  |  | 2,192 |
Total | 6 |  |  | $ | 3,144 |  |  | $ | 3,100 |
The TDRs described above increased the allowance for loan losses by less than $0.1 million and resulted in no charge-offs during the nine months ended September 30, 2015. The TDRs described above did not increase the allowance for loan losses and resulted in less than $0.1 million in charge-offs during the nine months ended September 30, 2014. There were no payment defaults on any loans previously modified as TDRs during the three and nine months ended September 30, 2015 or 2014, 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 residential mortgages, indirect and direct consumer loans, home equity lines and loans, and credit cards, 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 September 30, 2015 and December 31, 2014, the risk category of the recorded investment of loans by class of loans is as follows (in thousands):
| September 30, 2015
| Not Rated |  | Pass |  | Loans acquired with deteriorated credit quality |  | Special Mention |  | Substandard |  | Doubtful |  | Total
Commercial and agricultural: |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial | $ | — |  |  | $ | 170,179 |  |  | $ | — |  |  | $ | 3,718 |  |  | $ | 1,521 |  |  | $ | 85 |  |  | $ | 175,503 |
Agricultural | — |  |  | 1,046 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,046 |
Commercial mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction | — |  |  | 45,326 |  |  | — |  |  | 293 |  |  | 65 |  |  | — |  |  | 45,684 |
Commercial mortgages | — |  |  | 412,811 |  |  | 1,849 |  |  | 12,200 |  |  | 12,798 |  |  | 4,151 |  |  | 443,809 |
Residential mortgages | 193,843 |  |  | — |  |  | 265 |  |  | — |  |  | 3,900 |  |  | — |  |  | 198,008 |
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit cards | 1,423 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,423 |
Home equity lines and loans | 101,515 |  |  | — |  |  | — |  |  | — |  |  | 819 |  |  | — |  |  | 102,334 |
Indirect consumer loans | 157,087 |  |  | — |  |  | — |  |  | — |  |  | 313 |  |  | — |  |  | 157,400 |
Direct consumer loans | 19,406 |  |  | — |  |  | — |  |  | — |  |  | 18 |  |  | — |  |  | 19,424 |
Total | $ | 473,274 |  |  | $ | 629,362 |  |  | $ | 2,114 |  |  | $ | 16,211 |  |  | $ | 19,434 |  |  | $ | 4,236 |  |  | $ | 1,144,631 |
| 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 |
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 September 30, 2015 and December 31, 2014 (in thousands):
| September 30, 2015
|  |  | Consumer Loans
| Residential Mortgages |  | Credit Card |  | Home Equity Lines and Loans |  | Indirect Consumer Loans |  | Other Direct Consumer Loans
Performing | $ | 194,108 |  |  | $ | 1,423 |  |  | $ | 101,523 |  |  | $ | 157,131 |  |  | $ | 19,406 |
Non-Performing | 3,900 |  |  | — |  |  | 811 |  |  | 269 |  |  | 18 |
| $ | 198,008 |  |  | $ | 1,423 |  |  | $ | 102,334 |  |  | $ | 157,400 |  |  | $ | 19,424 |
| 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 |
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 July 1, 2015 to September 30, 2015 and January 1, 2015 to September 30, 2015 (in thousands):
Three Months Ended September 30, 2015 | Balance at June 30, 2015 |  | Income Accretion |  | All Other Adjustments |  | Balance at September 30, 2015
Contractually required principal and interest | $ | 3,036 |  |  | $ | — |  |  | $ | (69 | ) |  | $ | 2,967 |
Contractual cash flows not expected to be collected (nonaccretable discount) | (568 | ) |  | — |  |  | 19 |  |  | (549 | )
Cash flows expected to be collected | 2,468 |  |  | — |  |  | (50 | ) |  | 2,418 |
Interest component of expected cash flows (accretable yield) | (324 | ) |  | 39 |  |  | (19 | ) |  | (304 | )
Fair value of loans acquired with deteriorating credit quality | $ | 2,144 |  |  | $ | 39 |  |  | $ | (69 | ) |  | $ | 2,114 |
Nine Months Ended September 30, 2015 | Balance at December 31, 2014 |  | Income Accretion |  | All Other Adjustments |  | Balance at September 30, 2015
Contractually required principal and interest | $ | 3,621 |  |  | $ | — |  |  | $ | (654 | ) |  | $ | 2,967 |
Contractual cash flows not expected to be collected (nonaccretable discount) | (570 | ) |  | — |  |  | 21 |  |  | (549 | )
Cash flows expected to be collected | 3,051 |  |  | — |  |  | (633 | ) |  | 2,418 |
Interest component of expected cash flows (accretable yield) | (420 | ) |  | 138 |  |  | (22 | ) |  | (304 | )
Fair value of loans acquired with deteriorating credit quality | $ | 2,631 |  |  | $ | 138 |  |  | $ | (655 | ) |  | $ | 2,114 |

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