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LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)
 3 Months Ended
Mar. 31, 2014
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 (dollars in thousands):

   
March 31, 2014
   
December 31, 2013
 
Commercial and agricultural:
               
  Commercial and industrial
 
$
144,681
   
$
144,787
 
  Agricultural
   
534
     
576
 
Commercial mortgages:
               
  Construction
   
29,692
     
27,440
 
  Commercial mortgages
   
367,175
     
345,707
 
Residential mortgages
   
196,396
     
195,997
 
Consumer loans:
               
  Credit cards
   
1,583
     
1,756
 
  Home equity lines and loans
   
95,827
     
95,905
 
  Indirect consumer loans
   
170,853
     
164,846
 
  Direct consumer loans
   
17,824
     
18,852
 
      Total loans, net of deferred origination
        fees and costs, and unearned income
 
$
1,024,565
   
$
995,866
 
Interest receivable on loans
   
2,367
     
2,597
 
      Total recorded investment in loans
 
$
1,026,932
   
$
998,463
 

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-month periods ending March 31, 2014 and 2013 (dollars in thousands):

   
Three Months Ended
 
   
March 31, 2014
 
Allowance for loan losses
 
Commercial and Agricultural
   
Commercial Mortgages
   
Residential Mortgages
   
Consumer Loans
   
Unallocated
   
Total
 
Beginning balance:
 
$
1,979
   
$
6,243
   
$
1,517
   
$
3,037
   
$
-
   
$
12,776
 
  Charge Offs:
   
(55
)
   
(44
)
   
(7
)
   
(467
)
   
-
     
(573
)
  Recoveries:
   
92
     
38
     
-
     
183
     
-
     
313
 
     Net recoveries (charge offs)
   
37
     
(6
)
   
(7
)
   
(284
)
   
-
     
(260
)
  Provision
   
(71
)
   
247
     
42
     
421
     
-
     
639
 
Ending balance
 
$
1,945
   
$
6,484
   
$
1,552
   
$
3,174
   
$
-
   
$
13,155
 

   
Three Months Ended
 
   
March 31, 2013
 
Allowance for loan losses
 
Commercial and Agricultural
   
Commercial Mortgages
   
Residential Mortgages
   
Consumer Loans
   
Unallocated
   
Total
 
Beginning balance:
 
$
1,707
   
$
4,428
 
$
 
1,566
   
$
2,706
   
$
26
   
$
10,433
   
  Charge Offs:
   
(17
)
   
-
     
(44
)
   
(197
)
   
-
     
(258
)
 
  Recoveries:
   
142
     
9
     
-
     
68
     
-
     
219
   
     Net recoveries (charge-offs)
   
125
     
9
     
(44
)
   
(129
)
   
-
     
(39
)
 
  Provision
   
161
     
236
     
35
     
25
     
(26)
     
431
   
Ending balance
 
$
1,993
   
$
4,673
   
$
1,557
   
$
2,602
   
$
-
   
$
10,825
   
 
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 March 31, 2014 and December 31, 2013 (dollars in thousands):

   
March 31, 2014
Allowance for loan losses
 
Commercial  and Agricultural
   
Commercial Mortgages
   
Residential Mortgages
   
Consumer Loans
   
Unallocated
   
Total
 
Ending allowance balance
  attributable to loans:
                                   
Individually evaluated for
  impairment
 
$
549
   
$
192
   
$
-
   
$
3
   
$
-
   
$
744
 
Collectively evaluated for
  impairment
   
1,396
     
4,802
     
1,540
     
3,171
     
-
     
10,909
 
Loans acquired with
  deteriorated credit quality
   
-
     
1,490
     
12
     
-
     
-
     
1,502
 
Total ending allowance balance
 
$
1,945
   
$
6,484
   
$
1,552
   
$
3,174
   
$
-
   
$
13,155
 
 
   
December 31, 2013
Allowance for loan losses
 
Commercial  and Agricultural
   
Commercial Mortgages
   
Residential Mortgages
   
Consumer Loans
   
Unallocated
   
Total
 
Ending allowance balance
  attributable to loans:
                                   
Individually evaluated for
  impairment
 
$
576
   
$
466
   
$
-
   
$
4
   
$
-
   
$
1,046
 
Collectively evaluated for
 impairment
   
1,403
     
4,407
     
1,497
     
3,033
     
-
     
10,340
 
Loans acquired with
  deteriorated credit quality
   
-
     
1,370
     
20
     
-
     
-
     
1,390
 
Total ending allowance balance
 
$
1,979
   
$
6,243
   
$
1,517
   
$
3,037
   
$
-
   
$
12,776
 
 
   
March 31, 2014
 
Loans:
 
Commercial
and
Agricultural
   
Commercial Mortgages
   
Residential Mortgages
   
Consumer Loans
   
Total
 
Loans individually
  evaluated for impairment
 
$
2,208
   
$
9,544
   
$
114
   
$
129
   
$
11,995
1,
Loans collectively
  evaluated for  impairment
   
142,675
     
379,366
     
196,518
     
286,616
     
1,005,175
 
Loans acquired with deteriorated
  credit quality
   
655
     
8,841
     
266
     
-
     
9,762
 
Total ending loans balance
 
$
145,538
   
$
397,751
   
$
196,898
   
$
286,745
   
$
1,026,932
 
 
   
December 31, 2013
 
Loans:
 
Commercial
and
Agricultural
   
Commercial Mortgages
   
Residential Mortgages
   
Consumer Loans
   
Total
 
Loans individually
  evaluated for impairment
 
$
2,946
   
$
10,703
   
$
117
   
$
131
   
$
13,897
 
Loans collectively
  evaluated for  impairment
   
142,108
     
354,636
     
196,147
     
281,979
     
974,870
 
Loans acquired with deteriorated
  credit quality
   
678
     
8,757
     
261
     
-
     
9,696
 
Total ending loans balance
 
$
145,732
   
$
374,096
   
$
196,525
   
$
282,110
   
$
998,463
 

Summary of impaired financing receivables
The following tables present loans individually evaluated for impairment recognized by class of loans as of March 31, 2014 and December 31, 2013, the average recorded investment and interest income recognized by class of loans as of the three-month periods ended March 31, 2014 and 2013 (dollars in thousands):

   
March 31, 2014
 
December 31, 2013
 
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
 
$
1,398
   
$
1,403
   
$
-
   
$
1,906
 
$
1,909
   
$
-
   
Commercial mortgages:
                                               
  Construction
   
2,286
     
2,273
     
-
     
2,329
   
2,319
     
-
   
  Commercial mortgages other
   
6,479
     
6,490
     
-
     
7,406
   
7,439
     
-
   
Residential mortgages
   
114
     
114
     
-
     
117
   
117
     
-
   
Consumer loans:
                                               
  Home equity lines and loans
   
69
     
71
     
-
     
71
   
73
     
-
   
With an allowance recorded:
                                               
Commercial and agricultural:
                                               
  Commercial and industrial
   
804
     
805
     
549
     
1,037
   
1,037
     
576
   
Commercial mortgages:
                                               
  Commercial mortgages other
   
783
     
781
     
192
     
951
   
945
     
466
   
Consumer loans:
                                               
  Home equity lines and loans
   
57
     
58
     
3
     
58
   
58
     
4
   
Total
 
$
11,990
   
$
11,995
   
$
744
   
$
13,875
 
$
13,897
   
$
1,046
   

     
Three Months Ended
March 31, 2014
   
Three Months Ended
March 31, 2013
   
With no related allowance recorded:
   
Average Recorded Investment
   
Interest Income Recognized (1)
     
Average Recorded Investment
     
Interest Income Recognized (1)
   
Commercial and agricultural:
                               
  Commercial and industrial
 
$
1,656
 
$
14
   
$
1,458
   
$
17
   
Commercial mortgages:
                               
  Construction
   
2,296
   
25
     
474
     
-
   
  Commercial mortgages other
   
7,005
   
63
     
5,583
     
53
   
Residential mortgages
   
115
   
-
     
130
     
-
   
Consumer loans:
                               
  Home equity lines & loans
   
72
   
1
     
23
     
-
   
With an allowance recorded:
                               
Commercial and agricultural:
                               
  Commercial and industrial
   
921
   
-
     
387
     
-
   
Commercial mortgages:
                               
  Commercial mortgages other
   
863
   
-
     
361
     
-
   
Consumer loans:
                               
  Home equity lines and loans
   
58
   
1
     
29
     
-
   
  Direct consumer loans
   
-
   
-
     
8
     
-
   
Total
 
$
12,986
 
$
104
   
$
8,453
   
$
70
   
(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 March 31, 2014 and December 31, 2013 (dollars in thousands):

March 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
 
$
142,750
   
$
520
   
$
-
   
$
655
   
$
1,078
   
$
145,003
 
  Agricultural
   
535
     
-
     
-
     
-
     
-
     
535
 
Commercial mortgages:
                                               
  Construction
   
27,037
     
-
     
1,451
     
774
     
496
     
29,758
 
  Commercial mortgages others
   
356,618
     
1,002
     
-
     
8,067
     
2,306
     
367,993
 
Residential mortgages
   
189,719
     
3,073
     
-
     
266
     
3,840
     
196,898
 
Consumer loans:
                                               
  Credit cards
   
1,568
     
8
     
7
     
-
     
-
     
1,583
 
  Home equity lines and loans
   
95,235
     
280
     
-
     
-
     
543
     
96,058
 
  Indirect consumer loans
   
169,838
     
1,091
     
-
     
-
     
293
     
171,222
 
  Direct consumer loans
   
17,822
     
49
     
-
     
-
     
11
     
17,882
 
  Total
 
$
1,001,122
   
$
6,023
   
$
1,458
   
$
9,762
   
$
8,567
   
$
1,026,932
 
(1)  Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of March 31, 2014.


December 31, 2013
 
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
 
$
143,100
   
$
29
   
$
-
   
$
678
   
$
1,348
   
$
145,155
 
  Agricultural
   
577
     
-
     
-
     
-
     
-
     
577
 
Commercial mortgages:
                                               
  Construction
   
24,742
     
-
     
1,454
     
774
     
540
     
27,510
 
  Commercial mortgages other
   
335,123
     
1,138
     
-
     
7,983
     
2,342
     
346,586
 
Residential mortgages
   
187,448
     
5,458
     
-
`
   
261
     
3,358
     
196,525
 
Consumer loans:
                                               
  Credit cards
   
1,729
     
9
     
19
     
-
     
-
     
1,757
 
  Home equity lines and loans
   
95,349
     
150
     
-
     
-
     
635
     
96,134
 
  Indirect consumer loans
   
163,810
     
1,235
     
-
     
-
     
249
     
165,294
 
 Direct consumer loans
   
18,830
     
50
     
-
     
-
     
45
     
18,925
 
  Total
 
$
970,708
   
$
8,069
   
$
1,473
   
$
9,696
   
$
8,517
   
$
998,463
 
(1)  Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of December 31, 2013.
 
Loans by class modified as troubled debt restructurings
The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended March 31, 2014 and March 31, 2013 (dollars in thousands):

March 31, 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
 

                         
March 31, 2013
                       
Troubled debt restructurings:
              
  Commercial and agricultural:
                       
    Commercial and industrial
   
2
   
$
431
   
$
431
 
  Consumer loans:
                       
    Home equity lines and loans
   
2
   
$
104
     
104
 
Total
   
4
   
$
535
   
$
535
 

Risk category of the recorded investment of loans by class of loans
Based on the analyses performed as of March 31, 2014 and December 31, 2013, the risk category of the recorded investment of loans by class of loans is as follows (dollars in thousands):


 
March 31, 2014
     
   
Not Rated
   
Pass
   
Loans acquired with deteriorated credit quality
   
Special Mention
   
Substandard
   
Doubtful
   
Commercial and agricultural:
                                     
  Commercial and industrial
 
$
-
   
$
134,207
   
$
655
   
$
6,068
   
$
3,268
   
$
805
   
  Agricultural
   
-
     
535
     
-
     
-
     
-
     
-
   
Commercial mortgages:
                                                 
  Construction
   
-
     
25,101
     
774
     
3,061
     
822
     
-
   
  Commercial mortgages other
   
-
     
333,719
     
8,067
     
16,394
     
9,753
     
60
   
Residential mortgages
   
192,792
     
-
     
266
     
-
     
3,840
     
-
   
Consumer loans:
                                                 
  Credit cards
   
1,583
     
-
     
-
     
-
     
-
     
-
   
  Home equity lines and loans
   
95,439
     
-
     
-
     
-
     
619
     
-
   
  Indirect consumer loans
   
170,920
     
-
     
-
     
-
     
302
     
-
   
  Direct consumer loans
   
17,871
     
-
     
-
     
-
     
11
     
-
   
Total
 
$
478,605
   
$
493,562
   
$
9,762
   
$
25,523
   
$
18,615
   
$
865
   

 
December 31, 2013
     
   
Not Rated
   
Pass
   
Loans acquired with deteriorated credit quality
   
Special Mention
   
Substandard
   
Doubtful
   
Commercial and agricultural:
                                     
  Commercial and industrial
 
$
-
   
$
133,615
   
$
678
   
$
5,117
   
$
4,724
   
$
1,021
   
  Agricultural
   
-
     
577
     
-
     
-
     
-
     
-
   
Commercial mortgages:
                                                 
  Construction
   
-
     
23,087
     
774
     
2,783
     
866
     
-
   
  Commercial mortgages other
   
-
     
313,956
     
7,983
     
13,611
     
11,036
     
-
   
Residential mortgages
   
192,995
     
-
     
261
     
-
     
3,269
     
-
   
Consumer loans
                                                 
  Credit cards
   
1,757
     
-
     
-
     
-
     
-
     
-
   
  Home equity lines and loans
   
95,422
     
-
     
-
     
-
     
712
     
-
   
  Indirect consumer loans
   
165,045
     
-
     
-
     
-
     
249
     
-
   
  Direct consumer loans
   
18,880
     
-
     
-
     
-
     
45
     
-
   
Total
 
$
474,099
   
$
471,235
   
$
9,696
   
$
21,511
   
$
20,901
   
$
1,021
   

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 March 31, 2014 and December 31, 2013 (dollars in thousands):

   
March 31, 2014
         
Consumer Loans
 
   
Residential Mortgages
   
Credit Card
   
Home Equity Lines and Loans
   
Indirect Consumer Loans
   
Other Direct Consumer Loans
 
Performing
 
$
193,058
   
$
1,576
   
$
95,515
   
$
170,929
   
$
17,871
 
Non-Performing
   
3,840
     
7
     
543
     
293
     
11
 
Total
 
$
196,898
   
$
1,583
   
$
96,058
   
$
171,222
   
$
17,882
 


   
December 31, 2013
         
Consumer Loans
 
   
Residential Mortgages
   
Credit Card
   
Home Equity Lines and Loans
   
Indirect Consumer Loans
   
Other Direct Consumer Loans
 
Performing
 
$
193,167
   
$
1,738
   
$
95,499
   
$
165,045
   
$
18,880
 
Non-Performing
   
3,358
     
19
     
635
     
249
     
45
 
   
$
196,525
   
$
1,757
   
$
96,134
   
$
165,294
   
$
18,925
 
 
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 January 1, 2014 to March 31, 2014 (dollars in thousands):
 
   
Balance at
December 31, 2013
   
Income Accretion
   
All Other Adjustments
   
Balance at
March 31,
2014
 
Contractually required principal and interest
 
$
11,230
   
$
-
   
$
(157
)
 
$
11,073
 
Contractual cash flows not expected to be collected
  (nonaccretable discount)
   
(543
)
   
-
     
108
     
(435
)
Cash flows expected to be collected
   
10,687
     
-
     
(49
)
   
10,638
 
Interest component of expected cash flows (accretable yield)
   
(991
)
   
199
     
(84
)
   
(876
)
Fair value of loans acquired with deteriorating credit quality
 
$
9,696
   
$
199
   
$
(133
)
 
$
9,762