LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)

9 Months Ended

Sep. 30, 2015

Loans and Leases Receivable Disclosure [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):



	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

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 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

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 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

Summary of impaired financing receivables

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.

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 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.

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 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 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

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 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

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 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

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 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