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Loans Receivable and Allowance for Loan Losses | 3 Months Ended
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Mar. 31, 2015
Loans Receivable and Allowance for Loan Losses [Abstract] |
Loans Receivable and Allowance for Loan Losses | 7. Loans Receivable and Allowance for Loan Losses Set forth below is selected data relating to the composition of the loan portfolio at the dates indicated:
| Types of loans |
| (dollars in thousands) |
| March 31, 2015 |  |  | December 31, 2014 |
Real Estate-Residential | $ | 157,707 |  | 30.4 | % |  | $ | 158,139 |  | 31.5 | %
Commercial |  | 265,635 |  | 51.1 |  |  |  | 261,956 |  | 52.2 |
Construction |  | 20,180 |  | 3.9 |  |  |  | 19,221 |  | 3.9 |
Commercial, financial and agricultural |  | 55,353 |  | 10.7 |  |  |  | 42,514 |  | 8.5 |
Consumer loans to individuals |  | 20,474 |  | 3.9 |  |  |  | 19,704 |  | 3.9 |
Total loans |  | 519,349 |  | 100.0 | % |  |  | 501,534 |  | 100.0 | %
Deferred fees, net |  | (388) |  |  |  |  |  | (399) |  |  |
Total loans receivable |  | 518,961 |  |  |  |  |  | 501,135 |  |  |
Allowance for loan losses |  | (6,007) |  |  |  |  |  | (5,875) |  |  |
Net loans receivable | $ | 512,954 |  |  |  |  | $ | 495,260 |  |  |
Changes in the accretable yield for purchased credit-impaired loans were as follows for the three months ended March 31 (in thousands):
| 2015 |  | 2014
Balance at beginning of period | $ | 8 |  | $ | 20
Accretion |  | - |  |  | (7)
Reclassification and other |  | - |  |  | -
Balance at end of period | $ | 8 |  | $ | 13
The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30 (in thousands):
| March 31, 2015 |  | December 31, 2014
Outstanding Balance | $ | 1,045 |  | $ | 1,057
Carrying Amount | $ | 1,038 |  | $ | 1,049
There were no material increases or decreases in the expected cash flows of these loans since the acquisition date. As of December 31, 2014, f or loans that were acquired with or without specific evidence of deterioration in credit quality, adjustments to the allowance for loan losses have been accounted for through the allowance for loan loss adequacy calculation. The Company maintains a loan review system, which allows for a periodic review of our loan portfolio and the early identification of potential impaired loans. Such system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers. Specific loan loss allowances are established for identified losses based on a review of such information. A loan evaluated for impairment is considered to be impaired when, based on current information and events, it is probably that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans identified as impaired are evaluated independently. We do not aggregate such loans for evaluation purposes. Impairment is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential mortgage loans for impairment disclosures, unless such loans are part of a larger relationship that is impaired, or are classified as a troubled debt restructuring. A loan is considered to be a troubled debt restructuring (“TDR”) loan when the Company grants a concession to the borrower because of the borrower’s financial condition that it would not otherwise consider. Such concessions include the reduction of interest rates, forgiveness of principal or interest, or other modifications of interest rates that are less than the current market rate for new obligations with similar risk. Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in foreclosed real estate owned on the Consolidated Balance Sheets. As of March 31, 2015 and December 31, 2014, foreclosed real estate owned totaled $1,698,000 and $3,726,000, respectively. As of March 31, 2015, included within foreclosed real estate owned is $225,000 of consumer residential mortgages that were foreclosed on or received via a deed in lieu transaction prior to the period end. As of March 31, 2015, the Company has initiated formal foreclosure proceedings on $1,055,000 of consumer residential mortgages. The following table shows the amount of loans in each category that were individually and collectively evaluated for impairment at the dates indicated:
| Real Estate Loans |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | Commercial |  | Consumer |  |  |
| Residential |  | Commercial |  | Construction |  | Loans |  | Loans |  | Total
March 31, 2015 | (In thousands)
Individually evaluated for impairment | $ | - |  | $ | 10,370 |  | $ | - |  | $ | - |  | $ | - |  | $ | 10,370
Loans acquired with deteriorated credit quality |  | 221 |  |  | 817 |  |  | - |  |  | - |  |  | - |  |  | 1,038
Collectively evaluated for impairment |  | 157,486 |  |  | 254,448 |  |  | 20,180 |  |  | 55,353 |  |  | 20,474 |  |  | 507,941
Total Loans | $ | 157,707 |  | $ | 265,635 |  | $ | 20,180 |  | $ | 55,353 |  | $ | 20,474 |  | $ | 519,349
| Real Estate Loans |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | Commercial |  | Consumer |  |  |
| Residential |  | Commercial |  | Construction |  | Loans |  | Loans |  | Total
| (In thousands)
December 31, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | - |  | $ | 10,556 |  | $ | - |  | $ | - |  | $ | - |  | $ | 10,556
Loans acquired with deteriorated credit quality |  | 225 |  |  | 824 |  |  | - |  |  | - |  |  | - |  |  | 1,049
Collectively evaluated for impairment |  | 157,914 |  |  | 250,576 |  |  | 19,221 |  |  | 42,514 |  |  | 19,704 |  |  | 489,929
Total Loans | $ | 158,139 |  | $ | 261,956 |  | $ | 19,221 |  | $ | 42,514 |  | $ | 19,704 |  | $ | 501,534
The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable. Also presented are the average recorded investments in the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired.
|  |  |  | Unpaid |  |  |
| Recorded |  | Principal |  | Associated
| Investment |  | Balance |  | Allowance
March 31, 2015 |  |  |  |  | (in thousands) |  |
With no related allowance recorded: |  |  |  |  |  |  |  |
Real Estate Loans |  |  |  |  |  |  |  |
Residential | $ | 221 |  | $ | 228 |  | $ | -
Commercial |  | 10,531 |  |  | 11,063 |  |  | -
Subtotal |  | 10,752 |  |  | 11,291 |  |  | -
With an allowance recorded: |  |  |  |  |  |  |  |
Real Estate Loans |  |  |  |  |  |  |  |
Commercial |  | 656 |  |  | 1,520 |  |  | 284
Subtotal |  | 656 |  |  | 1,520 |  |  | 284
Total: |  |  |  |  |  |  |  |
Real Estate Loans |  |  |  |  |  |  |  |
Residential |  | 221 |  |  | 228 |  |  | -
Commercial |  | 11,187 |  |  | 12,583 |  |  | 284
Total Impaired Loans | $ | 11,408 |  | $ | 12,811 |  | $ | 284
|  |  |  | Unpaid |  |  |
| Recorded |  | Principal |  | Associated
| Investment |  | Balance |  | Allowance
December 31, 2014 |  |  |  |  | (in thousands) |  |
With no related allowance recorded: |  |  |  |  |  |  |  |
Real Estate Loans |  |  |  |  |  |  |  |
Residential | $ | 225 |  | $ | 233 |  | $ | -
Commercial |  | 8,407 |  |  | 8,566 |  |  | -
Subtotal |  | 8,632 |  |  | 8,799 |  |  | -
With an allowance recorded: |  |  |  |  |  |  |  |
Real Estate Loans |  |  |  |  |  |  |  |
Commercial |  | 2,973 |  |  | 3,837 |  |  | 293
Subtotal |  | 2,973 |  |  | 3,837 |  |  | 293
Total: |  |  |  |  |  |  |  |
Real Estate Loans |  |  |  |  |  |  |  |
Residential |  | 225 |  |  | 233 |  |  | -
Commercial |  | 11,380 |  |  | 12,403 |  |  | 293
Total Impaired Loans | $ | 11,605 |  | $ | 12,636 |  | $ | 293
The following information for impaired loans is presented (in thousands) for the three months ended March 31, 2015 and 2014:
| Average Recorded |  | Interest Income
| Investment |  | Recognized
| 2015 |  | 2014 |  | 2015 |  | 2014
Total: |  |  |  |  |  |  |  |  |  |  |
Real Estate Loans |  |  |  |  |  |  |  |  |  |  |
Residential | $ | 223 |  | $ | 240 |  | $ | 1 |  | $ | 1
Commercial |  | 11,210 |  |  | 11,754 |  |  | 396 |  |  | 57
Total Loans | $ | 11,433 |  | $ | 11,994 |  | $ | 397 |  | $ | 58
Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of financial difficulties experienced by the borrower, who could not obtain comparable terms from alternate financing sources. As of March 31, 20 15, troubled debt restructured loans totaled $8.6 million and resulted in specific reserves o f $33,000. As of December 31, 2014, troubled debt restructured loans totaled $8.8 million and resulted in specific reserves of $293,000. For the period ended March 31, 2015, there were no new loans identified as troubled debt restructurings. During 201 5, the Company recognized write-downs in the amount of $373,000 on two loans previously identified as troubled debt restructurings with a carrying value of $2.4 million as of March 31, 2015. For the period ended March 31, 2014, there were no new loans identified as troubled debt restructures, nor were there any loan modifications classified as troubled debt restructures that subsequently defaulted during the period.
Management uses an eight point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first four categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category. To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as non performance, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Loan Review Department is responsible for the timely and accurate risk rating of the loans on an ongoing basis. Every credit which must be approved by Loan Committee or the Board of Directors is assigned a risk rating at time of consideration. Loan Review also annually reviews relationships of $1,000,000 and o ver to assign or re-affirm risk ratings. Loans in the Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance. The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, Doubtful and Loss within the internal risk rating system as of March 31, 2015 and December 31, 201 4 (in thousands):
|  |  |  | Special |  |  |  |  |  | Doubtful |  |
| Pass |  | Mention |  | Substandard |  | and Loss |  | Total
March 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate loans | $ | 250,536 |  | $ | 1,957 |  | $ | 13,142 |  | $ | - |  | $ | 265,635
Commercial loans |  | 55,353 |  |  | - |  |  | - |  |  | - |  |  | 55,353
Total | $ | 305,889 |  | $ | 1,957 |  | $ | 13,142 |  | $ | - |  | $ | 320,988
|  |  |  | Special |  |  |  |  |  | Doubtful |  |
| Pass |  | Mention |  | Substandard |  | and Loss |  | Total
December 31, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate loans | $ | 246,629 |  | $ | 1,983 |  | $ | 13,344 |  | $ | - |  | $ | 261,956
Commercial loans |  | 42,514 |  |  | - |  |  | - |  |  | - |  |  | 42,514
Total | $ | 289,143 |  | $ | 1,983 |  | $ | 13,344 |  | $ | - |  | $ | 304,470
For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits. The following table presents the recorded investment in the loan classes based on payment activity as of March 31, 2015 and December 31, 2014 (in thousands):
| Performing |  | Nonperforming |  | Total
March 31, 2015 |  |  |  |  |  |  |  |
Residential real estate loans | $ | 156,248 |  | $ | 1,459 |  | $ | 157,707
Construction |  | 20,180 |  |  | - |  |  | 20,180
Consumer loans |  | 20,472 |  |  | 2 |  |  | 20,474
Total | $ | 196,900 |  | $ | 1,461 |  | $ | 198,361
| Performing |  | Nonperforming |  | Total
December 31, 2014 |  |  |  |  |  |  |  |
Residential real estate loans | $ | 156,464 |  | $ | 1,675 |  | $ | 158,139
Construction |  | 19,221 |  |  | - |  |  | 19,221
Consumer loans |  | 19,700 |  |  | 4 |  |  | 19,704
Total | $ | 195,385 |  | $ | 1,679 |  | $ | 197,064
Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of March 31, 2015 and December 31, 201 4 (in thousands):
| Current |  | 31-60 Days Past Due |  | 61-90 Days Past Due |  | Greater than 90 Days Past Due and still accruing |  | Non-Accrual |  | Total Past Due and Non-Accrual |  | Total Loans
March 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real Estate loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential | $ | 156,071 |  | $ | 177 |  | $ | - |  | $ | - |  | $ | 1,459 |  | $ | 1,636 |  | $ | 157,707
Commercial |  | 261,211 |  |  | 147 |  |  | - |  |  | - |  |  | 4,277 |  |  | 4,424 |  |  | 265,635
Construction |  | 20,180 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 20,180
Commercial loans |  | 55,329 |  |  | 24 |  |  | - |  |  | - |  |  | - |  |  | 24 |  |  | 55,353
Consumer loans |  | 20,403 |  |  | 57 |  |  | 12 |  |  | - |  |  | 2 |  |  | 71 |  |  | 20,474
Total | $ | 513,194 |  | $ | 405 |  | $ | 12 |  | $ | - |  | $ | 5,738 |  | $ | 6,155 |  | $ | 519,349
| Current |  | 31-60 Days Past Due |  | 61-90 Days Past Due |  | Greater than 90 Days Past Due and still accruing |  | Non-Accrual |  | Total Past Due and Non-Accrual |  | Total Loans
December 31, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real Estate loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential | $ | 156,242 |  | $ | 222 |  | $ | - |  | $ | - |  | $ | 1,675 |  | $ | 1,897 |  | $ | 158,139
Commercial |  | 252,495 |  |  | 5,100 |  |  | 440 |  |  | - |  |  | 3,921 |  |  | 9,461 |  |  | 261,956
Construction |  | 19,221 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 19,221
Commercial loans |  | 42,500 |  |  | 14 |  |  | - |  |  | - |  |  | - |  |  | 14 |  |  | 42,514
Consumer loans |  | 19,606 |  |  | 94 |  |  | - |  |  | - |  |  | 4 |  |  | 98 |  |  | 19,704
Total | $ | 490,064 |  | $ | 5,430 |  | $ | 440 |  | $ | - |  | $ | 5,600 |  | $ | 11,470 |  | $ | 501,534
The following table presents the allowance for loan losses by the classes of the loan portfolio:
(In thousands) | Residential Real Estate |  | Commercial Real Estate |  | Construction |  | Commercial |  | Consumer |  | Total
Beginning balance, December 31, 2014 | $ | 1,323 |  | $ | 3,890 |  | $ | 222 |  | $ | 256 |  | $ | 184 |  | $ | 5,875
Charge Offs |  | (87) |  |  | (393) |  |  | - |  |  | - |  |  | (15) |  |  | (495)
Recoveries |  | 2 |  |  | - |  |  | - |  |  | - |  |  | 5 |  |  | 7
Provision for loan losses |  | 115 |  |  | 497 |  |  | (107) |  |  | 97 |  |  | 18 |  |  | 620
Ending balance, March 31, 2015 | $ | 1,353 |  | $ | 3,994 |  | $ | 115 |  | $ | 353 |  | $ | 192 |  | $ | 6,007
Ending balance individually evaluated for impairment | $ | - |  | $ | 284 |  | $ | - |  | $ | - |  | $ | - |  | $ | 284
Ending balance collectively evaluated for impairment | $ | 1,353 |  | $ | 3,710 |  | $ | 115 |  | $ | 353 |  | $ | 192 |  | $ | 5,723
(In thousands) | Residential Real Estate |  | Commercial Real Estate |  | Construction |  | Commercial |  | Consumer |  | Total
Beginning balance, December 31, 2013 | $ | 1,441 |  | $ | 3,025 |  | $ | 898 |  | $ | 184 |  | $ | 160 |  | $ | 5,708
Charge Offs |  | (75) |  |  | (329) |  |  | - |  |  | - |  |  | (11) |  |  | (415)
Recoveries |  | - |  |  | - |  |  | - |  |  | - |  |  | 14 |  |  | 14
Provision for loan losses |  | (34) |  |  | 1,146 |  |  | (667) |  |  | - |  |  | (25) |  |  | 420
Ending balance, March 31, 2014 | $ | 1,332 |  | $ | 3,842 |  | $ | 231 |  | $ | 184 |  | $ | 138 |  | $ | 5,727
Ending balance individually evaluated for impairment | $ | - |  | $ | 203 |  | $ | - |  | $ | - |  | $ | - |  | $ | 203
Ending balance collectively evaluated for impairment | $ | 1,332 |  | $ | 3,639 |  | $ | 231 |  | $ | 184 |  | $ | 138 |  | $ | 5,524
The Company’s primary business activity as of March 31, 2015 and December 31, 201 4 is with customers located in northeastern Pennsylvania. Accordingly, the Company has extended credit primarily to commercial entities and individuals in this area whose ability to honor their contracts is influenced by the region’s economy. As of March 31, 2015, the Company considered its concentration of credit risk to be acceptable. The highest concentrations are in the hospitality lodging industry, automobile dealers, property owners associations and resorts with loans outstanding of $34.1 million, or 37.5% of capital, to the hospitality lodging industry, $15.1 million, or 16.6% of capital to automobile dealers, $13.2 million, or 14.5% of capital, to property owners associations and $9.6 million, or 10.6 % of capital, to the resort industry. During the three-month period ended March 31, 2015, the re were no write down s in the named concentrations. Gross realized gains and gross realized losses on sales of residential mortgage loans were $24,000 and $0, respectively, in the first three months of 201 5 compared to $42,000 and $0, respectively, in the same period in 201 4. The proceeds from the sales of residential mortgage loans totaled $804,000 and $1.2 million for the three months ended March 31, 201 5 and 201 4, respectively.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.3,4) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 3, 4 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35738203&loc=d3e5074-111524 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35738203&loc=d3e5066-111524 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 7 -Article 9 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(k)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph k -Article 4 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=35738203&loc=d3e5162-111524 + Details
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