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LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)
 3 Months Ended
Mar. 31, 2015
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 (in thousands):

  
March 31,
2015
  
December 31, 2014
 
Commercial and agricultural:
    
  Commercial and industrial
 
$
170,677
  
$
165,385
 
  Agricultural
  
1,155
   
1,021
 
Commercial mortgages:
        
  Construction
  
49,392
   
54,831
 
  Commercial mortgages
  
430,993
   
397,762
 
Residential mortgages
  
198,628
   
196,809
 
Consumer loans:
        
  Credit cards
  
1,526
   
1,654
 
  Home equity lines and loans
  
98,706
   
99,354
 
  Indirect consumer loans
  
173,722
   
184,763
 
  Direct consumer loans
  
18,773
   
19,995
 
      Total loans, net of deferred loan fees
 
$
1,143,572
  
$
1,121,574
 
Interest receivable on loans
  
2,673
   
2,780
 
      Total recorded investment in loans
 
$
1,146,245
  
$
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-month periods ending March 31, 2015 and 2014 (in thousands):

  
Three Months Ended
 
  
March 31, 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:
  
-
   
-
   
(21
)
  
(369
)
  
(390
)
  Recoveries:
  
15
   
67
   
-
   
124
   
206
 
     Net recoveries (charge-offs)
  
15
   
67
   
(21
)
  
(245
)
  
(184
)
  Provision
  
196
   
137
   
43
   
14
   
390
 
Ending balance
 
$
1,671
  
$
6,530
  
$
1,594
  
$
4,097
  
$
13,892
 

  
Three Months Ended
 
  
March 31, 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:
  
(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
 
 
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, 2015 and December 31, 2014 (in thousands):

 
March 31, 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
 
$
301
  
$
1,280
  
$
-
  
$
-
  
$
1,581
 
Collectively evaluated for impairment
  
1,370
   
5,214
   
1,572
   
4,097
   
12,253
 
Loans acquired with deteriorated credit quality
  
-
   
36
   
22
   
-
   
58
 
Total ending allowance balance
 
$
1,671
  
$
6,530
  
$
1,594
  
$
4,097
  
$
13,892
 

 
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
 

  
March 31, 2015
 
Loans:
 
Commercial and Agricultural
  
Commercial Mortgages
  
Residential Mortgages
  
Consumer Loans
  
Total
 
Loans individually evaluated for impairment
 
$
1,973
  
$
13,767
  
$
249
  
$
483
  
$
16,472
 
Loans collectively evaluated for  impairment
  
170,254
   
465,960
   
198,622
   
292,920
   
1,127,756
 
Loans acquired with deteriorated credit quality
  
-
   
1,761
   
256
   
-
   
2,017
 
Total ending loans balance
 
$
172,227
  
$
481,488
  
$
199,127
  
$
293,403
  
$
1,146,245
 

  
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 March 31, 2015 and December 31, 2014, the average recorded investment and interest income recognized by class of loans as of the three-month periods ended March 31, 2015 and 2014 (in thousands):
  
March 31, 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
 
$
1,668
  
$
1,670
  
$
-
  
$
1,359
  
$
1,364
  
$
-
 
Commercial mortgages:
                        
  Construction
  
1,919
   
1,899
   
-
   
1,927
   
1,910
   
-
 
  Commercial mortgages other
  
7,686
   
7,593
   
-
   
7,803
   
7,708
   
-
 
Residential mortgages
  
249
   
249
   
-
   
253
   
253
   
-
 
Consumer loans:
                        
  Home equity lines and loans
  
480
   
483
   
-
   
429
   
432
   
-
 
With an allowance recorded:
                        
Commercial and agricultural:
                        
  Commercial and industrial
  
301
   
303
   
301
   
89
   
89
   
89
 
Commercial mortgages:
                        
  Commercial mortgages other
  
4,394
   
4,275
   
1,280
   
4,210
   
4,094
   
1,145
 
Consumer loans:
                        
  Home equity lines and loans
  
-
   
-
   
-
   
54
   
54
   
1
 
Total
 
$
16,697
  
$
16,472
  
$
1,581
  
$
16,124
  
$
15,904
  
$
1,235
 

  
Three Months Ended March 31, 2015
  
Three Months Ended March 31, 2014
 
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
 
$
1,517
  
$
15
  
$
1,656
  
$
14
 
Commercial mortgages:
                
  Construction
  
1,904
   
25
   
2,296
   
25
 
  Commercial mortgages other
  
7,674
   
63
   
7,005
   
63
 
Residential mortgages
  
252
   
1
   
115
   
-
 
Consumer loans:
                
  Home equity lines & loans
  
458
   
6
   
72
   
1
 
With an allowance recorded:
                
Commercial and agricultural:
                
  Commercial and industrial
  
196
   
3
   
921
   
-
 
Commercial mortgages:
                
  Commercial mortgages other
  
4,184
   
23
   
863
   
-
 
Consumer loans:
                
  Home equity lines and loans
  
27
   
-
   
58
   
1
 
Total
 
$
16,212
  
$
136
  
$
12,986
  
$
104
 
(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, 2015 and December 31, 2014 (in thousands):
March 31, 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
 
$
170,397
  
$
317
  
$
24
  
$
-
  
$
331
  
$
171,069
 
  Agricultural
  
1,158
   
-
   
-
   
-
   
-
   
1,158
 
Commercial mortgages:
                        
  Construction
  
47,913
   
-
   
1,444
   
-
   
148
   
49,505
 
  Commercial mortgages
  
424,367
   
536
   
-
   
1,761
   
5,319
   
431,983
 
Residential mortgages
  
193,684
   
1,482
   
-
   
256
   
3,705
   
199,127
 
Consumer loans:
                        
  Credit cards
  
1,505
   
13
   
8
   
-
   
-
   
1,526
 
  Home equity lines and loans
  
97,626
   
672
   
-
   
-
   
655
   
98,953
 
  Indirect consumer loans
  
172,573
   
1,266
   
-
   
-
   
249
   
174,088
 
  Direct consumer loans
  
18,781
   
43
   
-
   
-
   
12
   
18,836
 
  Total
 
$
1,128,004
  
$
4,329
  
$
1,476
  
$
2,017
  
$
10,419
  
$
1,146,245
 
(1)  Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of March 31, 2015.

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
  
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 delinquent 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 March 31, 2015 and 2014 (in thousands):

March 31, 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
 
Total
  
1
  
$
477
  
$
477
 

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
 
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 March 31, 2015 and December 31, 2014, the risk category of the recorded investment of loans by class of loans is as follows (in thousands):

  
March 31, 2015
 
  
Not Rated
  
Pass
  
Loans acquired with deteriorated credit quality
  
Special Mention
  
Substandard
  
Doubtful
  
Total
 
Commercial and agricultural:
              
  Commercial and industrial
 
$
-
  
$
164,385
  
$
-
  
$
4,220
  
$
2,285
  
$
179
  
$
171,069
 
  Agricultural
  
-
   
1,158
   
-
   
-
   
-
   
-
   
1,158
 
Commercial mortgages:
                            
  Construction
  
-
   
47,607
   
-
   
1,750
   
148
   
-
   
49,505
 
  Commercial mortgages
  
-
   
403,633
   
1,761
   
9,021
   
13,368
   
4,200
   
431,983
 
Residential mortgages
  
195,166
   
-
   
256
   
-
   
3,705
   
-
   
199,127
 
Consumer loans
                            
  Credit cards
  
1,526
   
-
   
-
   
-
   
-
   
-
   
1,526
 
  Home equity lines and loans
  
98,298
   
-
   
-
   
-
   
655
   
-
   
98,953
 
  Indirect consumer loans
  
173,835
   
-
   
-
   
-
   
253
   
-
   
174,088
 
  Direct consumer loans
  
18,824
   
-
   
-
   
-
   
12
   
-
   
18,836
 
Total
 
$
487,649
  
$
616,783
  
$
2,017
  
$
14,991
  
$
20,426
  
$
4,379
  
$
1,146,245
 

  
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
  
$
14,991
  
$
20,426
  
$
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 March 31, 2015 and December 31, 2014 (in thousands):

 
March 31, 2015
 
  
Consumer Loans
 
 
Residential Mortgages
 
Credit Card
 
Home Equity Lines and Loans
 
Indirect Consumer Loans
 
Other Direct Consumer Loans
 
Performing
 
$
195,422
  
$
1,526
  
$
98,298
  
$
173,839
  
$
18,824
 
Non-Performing
  
3,705
   
-
   
655
   
249
   
12
 
  
$
199,127
  
$
1,526
  
$
98,953
  
$
174,088
  
$
18,836
 

 
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 January 1, 2015 to March 31, 2015 (in thousands):

  
Balance at
December 31, 2014
  
Income Accretion
  
All Other Adjustments
  
Balance at
March 31,
2015
 
Contractually required principal and interest
 
$
3,621
  
$
-
  
$
(676
)
 
$
2,945
 
Contractual cash flows not expected to be collected (nonaccretable discount)
  
(570
)
  
-
   
(25
)
  
(595
)
Cash flows expected to be collected
  
3,051
   
-
   
(701
)
  
2,350
 
Interest component of expected cash flows (accretable yield)
  
(420
)
  
63
   
(24
)
  
(333
)
Fair value of loans acquired with deteriorating credit quality
 
$
2,631
  
$
63
  
$
(677
)
 
$
2,017