LOANS (Tables)

12 Months Ended

Dec. 31, 2015

Receivables [Abstract]

Major Classifications of Loans

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

	2015		2014
Commercial and industrial	$	45,275	35,424
Commercial, secured by real estate	419,633		379,141
Residential real estate	273,139		254,087
Consumer	18,510		18,006
Agricultural	13,479		11,472
Other loans, including deposit overdrafts	665		680
	770,701		698,810
Deferred origination costs (fees), net	237		146
	770,938		698,956
Less allowance for loan losses	3,129		3,121
Loans-net	$	767,809	695,835

Schedule of Acquired Non Impaired Loans

The following table provides certain information at the acquisition date on loans acquired from BNB on April 30, 2015 and from Eaton National on January 24, 2014, not including loans considered to be impaired (in thousands):

	BNB		Eaton National
Contractually required principal at acquisition	$	32,174	102,483
Less fair value adjustment	199		1,347
Fair value of acquired loans	$	31,975	101,136
Contractual cash flows not expected to be collected	$	195	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 mergers with BNB and Eaton National that are accounted for in accordance with FASB ASC 310-30 (in thousands):

	BNB			Eaton National
Contractually required principal at acquisition	$	3,511		23,414
Contractual cash flows not expected to be collected (nonaccretable difference)	(404		)	(6,088	)
Expected cash flows at acquisition	3,107			17,326
Interest component of expected cash flows (accretable discount)	(413		)	(2,163	)
Fair value of acquired impaired loans	$	2,694		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):

	2015			2014
Non-accrual loans:
Commercial and industrial	$	—		—
Commercial, secured by real estate	876			4,277
Agricultural	48			70
Residential real estate	799			1,252
Total non-accrual loans	1,723			5,599
Past-due 90 days or more and still accruing	559			203
Total non-accrual and past-due 90 days or more and still accruing	2,282			5,802
Accruing restructured loans	13,723			14,269
Total	$	16,005		20,071
Percentage of total non-accrual and past-due 90 days or more and still accruing to total loans	0.30		%	0.83	%
Percentage of total non-accrual, past-due 90 days or more and still accruing, and accruing restructured loans to total loans	2.08		%	2.87	%

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, 2015
Allowance for loan losses:
Balance, beginning of year	$	129		1,990		926		63		11		2		3,121
Provision charged to expenses	208			955		125		(17	)	55		40		1,366
Losses charged off	(100		)	(1,133	)	(304	)	(52	)	(67	)	(74	)	(1,730	)
Recoveries	7			96		107		60		67		35		372
Balance, end of year	$	244		1,908		854		54		66		3		3,129
Individually evaluated for impairment	$	9		306		48		—		—		—		363
Collectively evaluated for impairment	235			1,602		806		54		66		3		2,766
Acquired credit impaired loans	—			—		—		—		—		—		—
Balance, end of year	$	244		1,908		854		54		66		3		3,129
Loans:
Individually evaluated for impairment	$	370		12,351		1,541		56		—		—		14,318
Collectively evaluated for impairment	43,726			399,092		269,001		18,516		13,438		179		743,952
Acquired credit impaired loans	1,191			7,877		3,039		27		48		486		12,668
Balance, end of year	$	45,287		419,320		273,581		18,599		13,486		665		770,938
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

	Commercial & Industrial			Commercial, Secured by Real Estate		Residential Real Estate		Consumer		Agricultural	Other		Total
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
Balance, end of year	$	175		2,520		826		66		—	1		3,588

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, 2015
Commercial & industrial	$	44,596	—	691	—	45,287
Commercial, secured by real estate	397,938		9,316	12,066	—	419,320
Residential real estate	267,567		1,935	4,079	—	273,581
Consumer	18,528		—	71	—	18,599
Agricultural	12,246		850	390	—	13,486
Other	665		—	—	—	665
Total	$	741,540	12,101	17,297	—	770,938
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

Loan Portfolio Aging Analysis

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, 2015
Commercial & industrial	$	—	—	—	—	45,287	45,287	—
Commercial, secured by real estate	73		81	876	1,030	418,290	419,320	—
Residential real estate	777		198	1,124	2,099	271,482	273,581	516
Consumer	62		7	43	112	18,487	18,599	43
Agricultural	—		—	—	—	13,486	13,486	—
Other	109		—	—	109	556	665	—
Total	$	1,021	286	2,043	3,350	767,588	770,938	559
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

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, 2015
With no related allowance recorded:
Commercial & industrial	$	1,205	1,500	—	1,467	206
Commercial, secured by real estate	16,345		18,335	—	18,575	2,229
Residential real estate	3,734		5,055	—	4,092	453
Consumer	81		109	—	106	25
Agricultural	48		151	—	81	487
Other	486		701	—	510	82
Total	$	21,899	25,851	—	24,831	3,482
With an allowance recorded:
Commercial & industrial	$	356	356	9	370	21
Commercial, secured by real estate	3,883		4,014	306	4,007	114
Residential real estate	846		958	48	864	37
Consumer	2		1	—	—	—
Agricultural	—		—	—	—	—
Other	—		—	—	—	—
Total	$	5,087	5,329	363	5,241	172
Total:
Commercial & industrial	$	1,561	1,856	9	1,837	227
Commercial, secured by real estate	20,228		22,349	306	22,582	2,343
Residential real estate	4,580		6,013	48	4,956	490
Consumer	83		110	—	106	25
Agricultural	48		151	—	81	487
Other	486		701	—	510	82
Total	$	26,986	31,180	363	30,072	3,654

	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	21,822		26,715	—	23,360	1,373
Residential real estate	4,057		5,549	—	4,645	379
Consumer	117		178	—	179	14
Agricultural	101		619	—	121	20
Other	513		744	—	550	43
Total	$	27,702	35,882	—	30,678	1,990
With an allowance recorded:
Commercial & industrial	$	401	406	10	319	19
Commercial, secured by real estate	4,184		4,538	717	4,108	117
Residential real estate	1,069		1,265	90	1,026	44
Consumer	19		20	—	18	2
Agricultural	—		—	—	—	—
Other	—		—	—	—	—
Total	$	5,673	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

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):

	2015					2014					2013
	Number of Loans	Pre-Modification Recorded Balance		Post-Modification Recorded Balance		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	1	75		74		2	896		1,214		3	1,594		1,594
Residential real estate	7	217		221		2	82		82		6	508		508
Consumer	2	9		9		3	40		40		2	27		27
	10	$	301	$	304	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):

	2015			2014		2013
Balance, beginning of year	$	591		498		475
Amount capitalized to mortgage servicing rights	78			292		191
Amortization of mortgage servicing rights	(181		)	(199	)	(168	)
Balance, end of year	$	488		591		498