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LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)
 3 Months Ended
Mar. 31, 2017
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 costs, is summarized as follows (in thousands):
 
 
March 31, 2017
 
December 31, 2016
Commercial and agricultural:
 
 
 
 
Commercial and industrial
 
$
177,575

 
$
176,201

Agricultural
 
500

 
360

Commercial mortgages:
 
 

 
 

Construction
 
51,706

 
46,387

Commercial mortgages, other
 
550,906

 
522,269

Residential mortgages
 
198,020

 
198,493

Consumer loans:
 
 

 
 

Credit cards
 
1,409

 
1,476

Home equity lines and loans
 
99,032

 
98,590

Indirect consumer loans
 
138,273

 
139,572

Direct consumer loans
 
16,830

 
16,942

Total loans, net of deferred origination fees and costs
 
$
1,234,251

 
$
1,200,290

Interest receivable on loans
 
3,136

 
3,192

Total recorded investment in loans
 
$
1,237,387

 
$
1,203,482
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 ended March 31, 2017 and 2016 (in thousands):
 
Three Months Ended March 31, 2017
Allowance for loan losses
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Beginning balance
$
1,589

 
$
7,270

 
$
1,523

 
$
3,871

 
$
14,253

Charge-offs
(5
)
 
—

 
(12
)
 
(427
)
 
(444
)
Recoveries
24

 
1

 
17

 
69

 
111

Net recoveries (charge-offs)
19

 
1

 
5

 
(358
)
 
(333
)
Provision
42

 
478

 
(16
)
 
536

 
1,040

Ending balance
$
1,650

 
$
7,749

 
$
1,512

 
$
4,049

 
$
14,960

 
Three Months Ended March 31, 2016
Allowance for loan losses
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Beginning balance
$
1,831

 
$
7,112

 
$
1,464

 
$
3,853

 
$
14,260

Charge-offs
(8
)
 
—

 
—

 
(443
)
 
(451
)
Recoveries
32

 
7

 
—

 
84

 
123

Net recoveries (charge-offs)
24

 
7

 
—

 
(359
)
 
(328
)
Provision
(60
)
 
413

 
18

 
224

 
595

Ending balance
$
1,795

 
$
7,532

 
$
1,482

 
$
3,718

 
$
14,527
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, 2017 and December 31, 2016 (in thousands):
 
March 31, 2017
Allowance for loan losses:
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Ending allowance balance attributable to loans:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
—

 
$
845

 
$
—

 
$
153

 
$
998

Collectively evaluated for impairment
1,650

 
6,845

 
1,487

 
3,896

 
13,878

Loans acquired with deteriorated credit quality
—

 
59

 
25

 
—

 
84

   Total ending allowance balance
$
1,650

 
$
7,749

 
$
1,512

 
$
4,049

 
$
14,960

 
December 31, 2016
Allowance for loan losses:
Commercial and Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Ending allowance balance attributable to loans:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
—

 
$
735

 
$
—

 
$
141

 
$
876

Collectively evaluated for impairment
1,589

 
6,476

 
1,498

 
3,730

 
13,293

Loans acquired with deteriorated credit quality
—

 
59

 
25

 
—

 
84

   Total ending allowance balance
$
1,589

 
$
7,270

 
$
1,523

 
$
3,871

 
$
14,253

 
March 31, 2017
Loans:
Commercial
and
Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Loans individually evaluated for impairment
$
649

 
$
11,969

 
$
390

 
$
432

 
$
13,440

Loans collectively evaluated for  impairment
177,885

 
590,922

 
198,007

 
255,763

 
1,222,577

Loans acquired with deteriorated credit quality
—

 
1,275

 
95

 
—

 
1,370

   Total ending loans balance
$
178,534

 
$
604,166

 
$
198,492

 
$
256,195

 
$
1,237,387

 
December 31, 2016
Loans:
Commercial
and
Agricultural
 
Commercial Mortgages
 
Residential Mortgages
 
Consumer Loans
 
Total
Loans individually evaluated for impairment
$
693

 
$
10,382

 
$
396

 
$
455

 
$
11,926

Loans collectively evaluated for  impairment
176,334

 
558,451

 
198,474

 
256,879

 
1,190,138

Loans acquired with deteriorated credit quality
—

 
1,323

 
95

 
—

 
1,418

   Total ending loans balance
$
177,027

 
$
570,156

 
$
198,965

 
$
257,334

 
$
1,203,482
Summary of impaired financing receivables
The following table presents loans individually evaluated for impairment recognized by class of loans as of March 31, 2017 and December 31, 2016 (in thousands):
 
March 31, 2017
 
December 31, 2016
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
$
646

 
$
649

 
$
—

 
$
690

 
$
693

 
$
—

Commercial mortgages:
 

 
 

 
 

 
 

 
 

 
 

Construction
1,558

 
1,559

 
—

 
277

 
278

 
—

Commercial mortgages, other
6,133

 
6,144

 
—

 
8,792

 
7,857

 
—

Residential mortgages
389

 
390

 
—

 
395

 
396

 
—

Consumer loans:
 

 
 

 
 

 
 

 
 

 
 

Home equity lines and loans
72

 
72

 
—

 
93

 
95

 
—

With an allowance recorded:
 

 
 

 
 

 
 

 
 

 
 

Commercial mortgages:
 

 
 

 
 

 
 

 
 

 
 

Commercial mortgages, other
5,206

 
4,266

 
845

 
2,245

 
2,247

 
735

Consumer loans:
 

 
 

 
 

 
 

 
 

 
 

Home equity lines and loans
360

 
360

 
153

 
360

 
360

 
141

Total
$
14,364

 
$
13,440

 
$
998

 
$
12,852

 
$
11,926

 
$
876


The following table presents the average recorded investment and interest income of loans individually evaluated for impairment recognized by class of loans as of the three-month periods ended March 31, 2017 and 2016 (in thousands):

 
 
Three Months Ended 
 March 31, 2017
 
Three Months Ended 
 March 31, 2016
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
 
$
671

 
$
9

 
$
1,266

 
$
13

Commercial mortgages:
 
 

 
 

 
 

 
 
Construction
 
919

 
3

 
348

 
4

Commercial mortgages, other
 
7,000

 
59

 
7,395

 
68

Residential mortgages
 
393

 
2

 
273

 
—

Consumer loans:
 
 

 
 

 
 

 
 

Home equity lines & loans
 
84

 
1

 
107

 
1

With an allowance recorded:
 
 

 
 

 
 

 
 

Commercial and agricultural:
 
 

 
 

 
 

 
 

Commercial and industrial
 
—

 
—

 
9

 
—

Commercial mortgages:
 
 

 
 

 
 

 
 

Commercial mortgages, other
 
3,257

 
1

 
4,845

 
1

Consumer loans:
 
 

 
 

 
 

 
 

Home equity lines and loans
 
360

 
—

 
364

 
—

Total
 
$
12,684

 
$
75

 
$
14,607

 
$
87

(1)Cash basis interest income approximates interest income recognized.

The following tables present the recorded investment in non-accrual and loans past due 90 days or more and still accruing by class of loans as of March 31, 2017 and December 31, 2016 (in thousands):

 
 
Non-accrual
 
Loans Past Due 90 Days or More and Still Accruing
 
 
March 31, 2017
 
December 31, 2016
 
March 31, 2017
 
December 31, 2016
Commercial and agricultural:
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
—

 
$
—

 
$
9

 
$
2

Commercial mortgages:
 
 
 
 
 
 
 
 
Construction
 
1,308

 
19

 
—

 
—

Commercial mortgages, other
 
5,639

 
5,454

 
—

 
—

Residential mortgages
 
3,524

 
4,201

 
—

 
—

Consumer loans:
 
 
 
 
 
 
 
 
Credit cards
 
—

 
—

 
18

 
11

Home equity lines and loans
 
1,647

 
1,670

 
—

 
—

Indirect consumer loans
 
765

 
654

 
—

 
—

Direct consumer loans
 
31

 
45

 
—

 
—

Total
 
$
12,914

 
$
12,043

 
$
27

 
$
13
Recorded investment in past due and non-accrual status by class of loans
The following tables present the aging of the recorded investment in loans as of March 31, 2017 and December 31, 2016 (in thousands):
 
March 31, 2017
 
30 - 59 Days Past Due
 
60 - 89 Days Past Due
 
90 Days or More Past Due
 
Total Past Due
 
Loans Acquired with Deteriorated Credit Quality
 
Loans Not Past Due
 
Total
Commercial and agricultural:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
155

 
$
1

 
$
9

 
$
165

 
$
—

 
$
177,868

 
$
178,033

Agricultural
—

 
—

 
—

 
—

 
—

 
501

 
501

Commercial mortgages:
 

 
 

 
 

 
 

 
 

 
 

 
 
Construction
—

 
—

 
1,289

 
1,289

 
—

 
50,551

 
51,840

Commercial mortgages, other
941

 
3,361

 
2,522

 
6,824

 
1,275

 
544,227

 
552,326

Residential mortgages
2,276

 
254

 
1,758

 
4,288

 
95

 
194,109

 
198,492

Consumer loans:
 

 
 

 
 

 
 

 
 

 
 
 
 
Credit cards
17

 
13

 
18

 
48

 
—

 
1,361

 
1,409

Home equity lines and loans
289

 
209

 
1,102

 
1,600

 
—

 
97,691

 
99,291

Indirect consumer loans
1,538

 
313

 
488

 
2,339

 
—

 
136,264

 
138,603

Direct consumer loans
68

 
2

 
8

 
78

 
—

 
16,814

 
16,892

Total
$
5,284

 
$
4,153

 
$
7,194

 
$
16,631

 
$
1,370

 
$
1,219,386

 
$
1,237,387



 
December 31, 2016
 
30 - 59 Days Past Due
 
60 - 89 Days Past Due
 
90 Days or More Past Due
 
Total Past Due
 
Loans Acquired with Deteriorated Credit Quality
 
Loans Not Past Due
 
Total
Commercial and agricultural:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
160

 
$
7

 
$
2

 
$
169

 
$
—

 
$
176,497

 
$
176,666

Agricultural
—

 
—

 
—

 
—

 
—

 
361

 
361

Commercial mortgages:
 

 
 

 
 

 
 

 
 

 
 

 
 
Construction
—

 
1,177

 
—

 
1,177

 
—

 
45,333

 
46,510

Commercial mortgages, other
652

 
4,460

 
2,412

 
7,524

 
1,323

 
514,799

 
523,646

Residential mortgages
2,100

 
436

 
2,383

 
4,919

 
95

 
193,951

 
198,965

Consumer loans:
 

 
 

 
 

 
 

 
 

 
 
 
 
Credit cards
3

 
9

 
11

 
23

 
—

 
1,453

 
1,476

Home equity lines and loans
227

 
—

 
1,149

 
1,376

 
—

 
97,477

 
98,853

Indirect consumer loans
1,773

 
287

 
542

 
2,602

 
—

 
137,391

 
139,993

Direct consumer loans
54

 
7

 
22

 
83

 
—

 
16,929

 
17,012

Total
$
4,969

 
$
6,383

 
$
6,521

 
$
17,873

 
$
1,418

 
$
1,184,191

 
$
1,203,482
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, 2017 and March 31, 2016 (dollars in thousands):

March 31, 2017
 
Number of Loans
 
Pre-Modification Outstanding Recorded Investment
 
Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
 
 
 
 
 
 
Commercial mortgages:
 
 
 
 
 
 
Commercial mortgages, other
 
1

 
$
166

 
$
166

Total
 
1

 
$
166

 
$
166


March 31, 2016
 
Number of Loans
 
Pre-Modification Outstanding Recorded Investment
 
Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
 
 
 
 
 
 
Residential mortgages
 
1

 
$
121

 
$
125

Total
 
1

 
$
121

 
$
125



The TDRs described above did not increase the allowance for loan losses and resulted in no charge-offs during the three-month periods ended March 31, 2017 and March 31, 2016.

The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the three months ended March 31, 2016:

 
 
Number of Loans
 
Recorded Investment
Commercial mortgages:
 
 
 
 
Commercial mortgages, other
 
2
 
$
2,145

Total
 
2
 
$
2,145
Risk category of the recorded investment of loans by class of loans
Based on the analyses performed as of March 31, 2017 and December 31, 2016, the risk category of the recorded investment of loans by class of loans is as follows (in thousands):
 
March 31, 2017
 
Not Rated
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Loans acquired with deteriorated credit quality
 
Total
Commercial and agricultural:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
—

 
$
172,307

 
$
4,203

 
$
1,523

 
$
—

 
$
—

 
$
178,033

Agricultural
—

 
501

 
—

 


 
—

 
—

 
501

Commercial mortgages:
 

 
 

 
 

 
 

 
 

 
 

 
 
Construction
—

 
50,281

 
252

 
1,307

 
—

 
—

 
51,840

Commercial mortgages
—

 
525,745

 
8,283

 
15,584

 
1,439

 
1,275

 
552,326

Residential mortgages
194,873

 
—

 
—

 
3,524

 
—

 
95

 
198,492

Consumer loans:
 

 
 

 
 

 
 

 
 

 
 

 
 
Credit cards
1,409

 
—

 
—

 
—

 
—

 
—

 
1,409

Home equity lines and loans
97,644

 
—

 
—

 
1,647

 
—

 
—

 
99,291

Indirect consumer loans
137,838

 
—

 
—

 
765

 
—

 
—

 
138,603

Direct consumer loans
16,861

 
—

 
—

 
31

 
—

 
—

 
16,892

Total
$
448,625

 
$
748,834

 
$
12,738

 
$
24,381

 
$
1,439

 
$
1,370

 
$
1,237,387

 
December 31, 2016
 
Not Rated
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Loans acquired with deteriorated credit quality
 
Total
Commercial and agricultural:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
—

 
$
172,873

 
$
2,277

 
$
1,516

 
$
—

 
$
—

 
$
176,666

Agricultural
—

 
361

 
—

 
—

 
—

 
—

 
361

Commercial mortgages:
 

 
 

 
 

 
 

 
 

 
 

 
 
Construction
—

 
45,055

 
259

 
1,196

 
—

 
—

 
46,510

Commercial mortgages
—

 
496,723

 
8,574

 
15,566

 
1,460

 
1,323

 
523,646

Residential mortgages
194,669

 
—

 
—

 
4,201

 
—

 
95

 
198,965

Consumer loans:
 

 
 

 
 

 
 

 
 

 
 

 
 
Credit cards
1,476

 
—

 
—

 
—

 
—

 
—

 
1,476

Home equity lines and loans
97,183

 
—

 
—

 
1,670

 
—

 
—

 
98,853

Indirect consumer loans
139,339

 
—

 
—

 
654

 
—

 
—

 
139,993

Direct consumer loans
16,967

 
—

 
—

 
45

 
—

 
—

 
17,012

Total
$
449,634

 
$
715,012

 
$
11,110

 
$
24,848

 
$
1,460

 
$
1,418

 
$
1,203,482
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, 2017 and December 31, 2016 (in thousands):

 
March 31, 2017
 
 
 
Consumer Loans
 
Residential Mortgages
 
Credit Card
 
Home Equity Lines and Loans
 
Indirect Consumer Loans
 
Other Direct Consumer Loans
Performing
$
194,968

 
$
1,409

 
$
97,644

 
$
137,838

 
$
16,861

Non-Performing
3,524

 
—

 
1,647

 
765

 
31

 
$
198,492

 
$
1,409

 
$
99,291

 
$
138,603

 
$
16,892

 
December 31, 2016
 
 
 
Consumer Loans
 
Residential Mortgages
 
Credit Card
 
Home Equity Lines and Loans
 
Indirect Consumer Loans
 
Other Direct Consumer Loans
Performing
$
194,764

 
$
1,476

 
$
97,183

 
$
139,339

 
$
16,967

Non-Performing
4,201

 
—

 
1,670

 
654

 
45

 
$
198,965

 
$
1,476

 
$
98,853

 
$
139,993

 
$
17,012
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 from January 1, 2017 to March 31, 2017 and January 1, 2016 to March 31, 2016 (in thousands):

Three Months Ended March 31, 2017
 
Balance at December 31, 2016
 
Income Accretion
 
All Other Adjustments
 
Balance at March 31, 2017
Contractually required principal and interest
 
$
1,940

 
$
—

 
$
(63
)
 
$
1,877

Contractual cash flows not expected to be collected (nonaccretable discount)
 
(352
)
 
—

 
—

 
(352
)
Cash flows expected to be collected
 
1,588

 
—

 
(63
)
 
1,525

Interest component of expected cash flows (accretable yield)
 
(170
)
 
15

 
—

 
(155
)
Fair value of loans acquired with deteriorating credit quality
 
$
1,418

 
$
15

 
$
(63
)
 
$
1,370


Three Months Ended March 31, 2016
 
Balance at December 31, 2015
 
Income Accretion
 
All Other Adjustments
 
Balance at March 31, 2016
Contractually required principal and interest
 
$
2,912

 
$
—

 
$
(54
)
 
$
2,858

Contractual cash flows not expected to be collected (nonaccretable discount)
 
(506
)
 
—

 
1

 
(505
)
Cash flows expected to be collected
 
2,406

 
—

 
(53
)
 
2,353

Interest component of expected cash flows (accretable yield)
 
(311
)
 
37

 
(1
)
 
(275
)
Fair value of loans acquired with deteriorating credit quality
 
$
2,095

 
$
37

 
$
(54
)
 
$
2,078