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LOANS (Tables)

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Major Classifications of Loans

Major classifications of loans at December 31 were as follows (in thousands):

	2014				2013
Commercial and industrial	$	35,424			29,337
Commercial, secured by real estate	379,141				314,252
Residential real estate	254,087				215,587
Consumer	18,006				12,643
Agricultural	11,472				2,472
Other loans, including deposit overdrafts	680				91
	698,810				574,382
Deferred origination costs (fees), net	146				(28	)
	698,956				574,354
Less allowance for loan losses	3,121				3,588
Loans-net	$	695,835			570,766

Schedule of Acquired Non Impaired Loans

The following table provides certain information at the acquisition date on loans acquired from Eaton National, not including loans considered to be impaired (in thousands):

Contractually required principal at acquisition	$	102,483
Less fair value adjustment	1,347
Fair value of acquired loans	$	101,136
Contractual cash flows not expected to be collected	$	1,702

Acquired Loans Accounted for in Accordance with FASB ASC 310-30

The following table provides details on acquired impaired loans obtained through the merger with Eaton National that are accounted for in accordance with FASB ASC 310-30 (in thousands):

Contractually required principal at acquisition	$	23,414
Contractual cash flows not expected to be collected (nonaccretable difference)	(6,088		)
Expected cash flows at acquisition	17,326
Interest component of expected cash flows (accretable discount)	(2,163		)
Fair value of acquired impaired loans	$	15,163

Non-accrual, Past Due, and Accruing Restructured Loans

Non-accrual, past-due, and accruing restructured loans at December 31 were as follows (in thousands):

	2014				2013
Non-accrual loans:
Commercial and industrial	$	—			144
Commercial, secured by real estate	4,277				1,418
Agricultural	70				—
Residential real estate	1,252				1,399
Total non-accrual loans	5,599				2,961
Past-due 90 days or more and still accruing	203				250
Total non-accrual and past-due 90 days or more and still accruing	5,802				3,211
Accruing restructured loans	14,269				15,151
Total	$	20,071			18,362
Percentage of total non-accrual and past-due 90 days or more and still accruing to total loans	0.83		%		0.56	%
Percentage of total non-accrual, past-due 90 days or more and still accruing, and accruing restructured loans to total loans	2.87		%		3.20	%

Allowance for Loan Losses and Recorded Investments in Loans

The allowance for loan losses and recorded investment in loans for the years ended December 31 were as follows (in thousands):

	Commercial & Industrial				Commercial, Secured by Real Estate			Residential Real Estate			Consumer			Agricultural			Other			Total
December 31, 2014
Allowance for loan losses:
Balance, beginning of year	$	175			2,520			826			66			—			1			3,588
Provision charged to expenses	173				(20	)		712			18			11			36			930
Losses charged off	(261		)		(573	)		(652	)		(129	)		—			(79	)		(1,694	)
Recoveries	42				63			40			108			—			44			297
Balance, end of year	$	129			1,990			926			63			11			2			3,121
Individually evaluated for impairment	$	10			415			89			—			—			—			514
Collectively evaluated for impairment	119				1,273			836			63			11			2			2,304
Acquired credit impaired loans	—				302			1			—			—			—			303
Balance, end of year	$	129			1,990			926			63			11			2			3,121
Loans:
Individually evaluated for impairment	$	401			13,022			1,701			55			—			—			15,179
Collectively evaluated for impairment	33,941				352,774			249,374			17,954			11,371			167			665,581
Acquired credit impaired loans	1,092				12,984			3,425			81			101			513			18,196
Balance, end of year	$	35,434			378,780			254,500			18,090			11,472			680			698,956
December 31, 2013
Allowance for loan losses:
Balance, beginning of year	$	320			2,296			712			108			—			1			3,437
Provision charged to expenses	(30		)		256			327			12			—			23			588
Losses charged off	(119		)		(58	)		(244	)		(181	)		—			(67	)		(669	)
Recoveries	4				26			31			127			—			44			232
Balance, end of year	$	175			2,520			826			66			—			1			3,588
Individually evaluated for impairment	$	2			760			270			—			—			—			1,032
Collectively evaluated for impairment	173				1,760			556			66			—			1			2,556
Acquired credit impaired loans	—				—			—			—			—			—			—
Balance, end of year	$	175			2,520			826			66			—			1			3,588
Loans:
Individually evaluated for impairment	$	165			14,522			2,132			27			—			—			16,846
Collectively evaluated for impairment	28,809				295,028			212,378			12,703			2,472			91			551,481
Acquired credit impaired loans	332				4,363			1,332			—			—			—			6,027
Balance, end of year	$	29,306			313,913			215,842			12,730			2,472			91			574,354

	Commercial & Industrial				Commercial, Secured by Real Estate			Residential Real Estate			Consumer			Agricultural			Other			Total
December 31, 2012
Allowance for loan losses:
Balance, beginning of year	$	162			1,941			656			166			—			6			2,931
Change in classification	18				(18	)		—			—			—			—			—
Provision charged to expenses	299				536			535			(47	)		—			28			1,351
Losses charged off	(159		)		(234	)		(486	)		(134	)		—			(85	)		(1,098	)
Recoveries	—				71			7			123			—			52			253
Balance, end of year	$	320			2,296			712			108			—			1			3,437
Individually evaluated for impairment	$	159			607			138			—			—			—			904
Collectively evaluated for impairment	161				1,689			574			108			—			1			2,533
Balance, end of year	$	320			2,296			712			108			—			1			3,437

Analysis of the Company's Loan Portfolio by Credit Quality Indicators

An analysis of the Company’s loan portfolio by credit quality indicators at December 31 is as follows (in thousands):

	Pass				OAEM			Substandard			Doubtful			Total
December 31, 2014
Commercial & industrial	$	34,322			—			1,112			—			35,434
Commercial, secured by real estate	353,957				6,421			18,402			—			378,780
Residential real estate	246,335				920			7,245			—			254,500
Consumer	17,979				—			111			—			18,090
Agricultural	11,273				—			199			—			11,472
Other	680				—			—			—			680
Total	$	664,546			7,341			27,069			—			698,956
December 31, 2013
Commercial & industrial	$	27,563			44			1,699			—			29,306
Commercial, secured by real estate	295,189				3,967			14,757			—			313,913
Residential real estate	208,881				1,136			5,825			—			215,842
Consumer	12,681				—			49			—			12,730
Agricultural	2,472				—			—			—			2,472
Other	91				—			—			—			91
Total	$	546,877			5,147			22,330			—			574,354

Loan Portfolio Aging Analysis

	Pass				OAEM			Substandard			Doubtful			Total
December 31, 2014
Commercial & industrial	$	34,322			—			1,112			—			35,434
Commercial, secured by real estate	353,957				6,421			18,402			—			378,780
Residential real estate	246,335				920			7,245			—			254,500
Consumer	17,979				—			111			—			18,090
Agricultural	11,273				—			199			—			11,472
Other	680				—			—			—			680
Total	$	664,546			7,341			27,069			—			698,956
December 31, 2013
Commercial & industrial	$	27,563			44			1,699			—			29,306
Commercial, secured by real estate	295,189				3,967			14,757			—			313,913
Residential real estate	208,881				1,136			5,825			—			215,842
Consumer	12,681				—			49			—			12,730
Agricultural	2,472				—			—			—			2,472
Other	91				—			—			—			91
Total	$	546,877			5,147			22,330			—			574,354

The Company evaluates the loan risk grading system definitions and allowance for loan loss methodology on an ongoing basis. No significant changes were made to either during the past year.

A loan portfolio aging analysis at December 31 is as follows (in thousands):

	30-59 Days Past Due				60-89 Days Past Due			Greater Than 90 Days			Total Past Due			Current			Total Loans Receivable			Total Loans Greater Than 90 Days and Accruing
December 31, 2014
Commercial & industrial	$	4			—			—			4			35,430			35,434			—
Commercial, secured by real estate	1,000				83			3,179			4,262			374,518			378,780			9
Residential real estate	648				297			1,289			2,234			252,266			254,500			177
Consumer	59				28			17			104			17,986			18,090			17
Agricultural	73				70			—			143			11,329			11,472			—
Other	106				—			—			106			574			680			—
Total	$	1,890			478			4,485			6,853			692,103			698,956			203
December 31, 2013
Commercial & industrial	$	277			—			144			421			28,885			29,306			—
Commercial, secured by real estate	951				582			1,174			2,707			311,206			313,913			—
Residential real estate	1,131				299			1,604			3,034			212,808			215,842			236
Consumer	38				35			13			86			12,644			12,730			14
Agricultural	—				—			—			—			2,472			2,472			—
Other	91				—			—			91			—			91			—
Total	$	2,488			916			2,935			6,339			568,015			574,354			250

Impaired Loans

Impaired loans for the years ended December 31 were as follows (in thousands):

	Recorded Investment				Unpaid Principal Balance			Related Allowance			Average Recorded Investment			Interest Income Recognized
December 31, 2014
With no related allowance recorded:
Commercial & industrial	$	1,092			2,077			—			1,823			161
Commercial, secured by real estate	21,987				26,715			—			23,360			1,373
Residential real estate	4,074				5,549			—			4,645			379
Consumer	117				178			—			179			14
Agricultural	101				619			—			121			20
Other	513				744			—			550			43
Total	$	27,884			35,882			—			30,678			1,990
With an allowance recorded:
Commercial & industrial	$	401			406			10			319			19
Commercial, secured by real estate	4,019				4,538			717			4,108			117
Residential real estate	1,052				1,265			90			1,026			44
Consumer	19				20			—			18			2
Agricultural	—				—			—			—			—
Other	—				—			—			—			—
Total	$	5,491			6,229			817			5,471			182
Total:
Commercial & industrial	$	1,493			2,483			10			2,142			180
Commercial, secured by real estate	26,006				31,253			717			27,468			1,490
Residential real estate	5,126				6,814			90			5,671			423
Consumer	136				198			—			197			16
Agricultural	101				619			—			121			20
Other	513				744			—			550			43
Total	$	33,375			42,111			817			36,149			2,172

	Recorded Investment				Unpaid Principal Balance			Related Allowance			Average Recorded Investment			Interest Income Recognized
December 31, 2013
With no related allowance recorded:
Commercial & industrial	$	332			531			—			700			35
Commercial, secured by real estate	10,883				12,317			—			11,612			748
Residential real estate	2,096				2,967			—			2,345			182
Consumer	—				—			—			7			—
Agricultural	—				—			—			13			6
Total	$	13,311			15,815			—			14,677			971
With an allowance recorded:
Commercial & industrial	$	165			270			2			186			2
Commercial, secured by real estate	7,725				7,725			760			7,368			252
Residential real estate	1,645				1,663			270			1,123			44
Consumer	27				27			—			17			2
Agricultural	—				—			—			—			—
Total	$	9,562			9,685			1,032			8,694			300
Total:
Commercial & industrial	$	497			801			2			886			37
Commercial, secured by real estate	18,608				20,042			760			18,980			1,000
Residential real estate	3,741				4,630			270			3,468			226
Consumer	27				27			—			24			2
Agricultural	—				—			—			13			6
Total	$	22,873			25,500			1,032			23,371			1,271

	Recorded Investment				Unpaid Principal Balance			Related Allowance			Average Recorded Investment			Interest Income Recognized
December 31, 2012
With no related allowance recorded:
Commercial & industrial	$	—			—			—			975			43
Commercial, secured by real estate	9,541				9,936			—			9,310			350
Residential real estate	417				417			—			397			5
Consumer	20				20			—			23			2
Agricultural	—				—			—			—			—
Total	$	9,978			10,373			—			10,705			400
With an allowance recorded:
Commercial & industrial	$	264			822			159			374			—
Commercial, secured by real estate	4,258				4,360			660			4,765			171
Residential real estate	658				853			85			707			2
Consumer	—				—			—			4			—
Agricultural	—				—			—			—			—
Total	$	5,180			6,035			904			5,850			173
Total:
Commercial & industrial	$	264			822			159			1,349			43
Commercial, secured by real estate	13,799				14,296			660			14,075			521
Residential real estate	1,075				1,270			85			1,104			7
Consumer	20				20			—			27			2
Agricultural	—				—			—			—			—
Total	$	15,158			16,408			904			16,555			573

Loan Modification that were Classified as Troubled Debt Restructuring

Loan modifications that were classified as troubled debt restructurings during the years ended December 31 were as follows (dollars in thousands):

	2014											2013
	Number of Loans			Pre-Modification Recorded Balance				Post-Modification Recorded Balance				Number of Loans			Pre-Modification Recorded Balance				Post-Modification Recorded Balance
Commercial and industrial	8			$	658			$	340			1			$	22			$	22
Commercial, secured by real estate	2			896				1,214				3			1,594				1,594
Residential real estate	2			82				82				6			508				508
Consumer	3			40				40				2			27				27
	15			$	1,676			$	1,676			12			$	2,151			$	2,151

Schedule of Activity in the Mortgage Servicing Rights Portfolio

Activity in the mortgage servicing rights portfolio during the years ended December 31 was as follows (in thousands):

	2014				2013			2012
Balance, beginning of year	$	498			475			418
Amount capitalized to mortgage servicing rights	292				191			283
Amortization of mortgage servicing rights	(199		)		(168	)		(226	)
Balance, end of year	$	591			498			475

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