FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK	12 Months Ended
Dec. 31, 2014
FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK [Abstract]
FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK	NOTE P - FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK The Corporation determines concentrations of credit risk by reviewing loans by borrower, geographical area, and loan purpose. The amount of credit extended to a single borrower or group of borrowers is capped by the legal lending limit, which is defined as 15% of the Bank's risk-based capital, less the allowance for loan losses. The Corporation's lending policy further restricts the amount to 75% of the legal lending limit. As of December 31, 2014, the Corporation's legal lending limit was $14,688,000, and the Corporation's lending policy limit was $11,016,000. This compared to a legal lending limit of $14,068,000, and lending policy limit of $10,551,000 as of December 31, 2013. As of December 31, 2014 and 2013, no lending relationships exceeded the Corporation's internal lending policy limit. Geographically, the primary lending area for the Corporation encompasses Lancaster, Lebanon, and Berks counties of Pennsylvania, with the vast majority of the loans made in Lancaster County. The ability of debtors to honor their loan agreements is impacted by the health of the local economy. The Corporation's immediate market area benefits from a diverse economy, which has resulted in a diverse loan portfolio. As a community bank, the largest amount of loans outstanding consists of personal mortgages, residential rental loans, and personal loans secured by real estate. Beyond personal lending, the Corporation's business and commercial lending includes loans for agricultural, construction, specialized manufacturing, service industries, many types of small businesses, and loans to governmental units and non-profit entities. Management evaluates concentrations of credit based on loan purpose on a quarterly basis. The Corporation's greatest concentration of loans by purpose is residential real estate, which comprises $163.3 million, or 34.7%, of the $470.7 million gross loans outstanding. Residential real estate consists of first mortgages and home equity loans. A concentration in commercial real estate of 51.8%, or $243.6 million, also exists; however, within that category there is not a concentration by specific industry type. Agricultural mortgages consist of 29.8% of gross loans as of December 31, 2014, compared to 26.1% as of December 31, 2013; however these agricultural mortgages are spread over several types of agricultural purpose loans. More specifically within these larger purpose categories, management monitors on a quarterly basis the largest concentrations of non-consumer credit based on the North American Industrial Classification System (NAICS). As of December 31, 2014, the largest specific industry type categories were dairy cattle and milk production loans of $81.9 million, or 17.4% of gross loans, non-residential real estate investment loans with a balance of $38.0 million, or 8.1% of gross loans, and residential investment real estate of $29.1 million, or 6.2% of gross loans. Out of the $60.3 million of loans designated as commercial & industrial for the Uniform Bank Performance Reports, the largest concentration within that area is $11.8 million of loans to political subdivisions, which account for 2.5% of gross loans outstanding. For the Corporation, these loans consisted of tax-free loans to local municipalities. To evaluate risk for the securities portfolio, the Corporation reviews both geographical concentration and credit ratings. The largest geographical concentrations as of December 31, 2014, were obligations of states and political subdivisions located in the states of Pennsylvania, Illinois, Texas, and California. Based on fair market value, the Corporation held $14.6 million of obligations issued by municipalities within the state of Pennsylvania, which is 15.7% of the municipal portfolio, and 5.0% of total debt securities. The Corporation held the same amount of obligations issued by municipalities in the state of Illinois. The Corporation also held $13.6 million of obligations of states and political subdivisions issued by municipalities located within the state of Texas, which is 14.5% of the municipal portfolio, and 4.7% of total debt securities. Finally, the Corporation held $11.5 million of obligations of states and political subdivisions by municipalities in the state of California, which is 12.3% of the municipal portfolio, and 4.0% of total debt securities. Internal policy requires municipal bonds purchased to be rated at least A3 by Moody's and/or A- by Standard & Poor's (S&P) at the time of purchase. Presently, all of the municipal bonds have ratings at these levels or higher. The Corporation held $65.3 million of corporate bonds based on amortized cost as of December 31, 2014. This total includes $15.2 million of sub U.S. agency debt, in this case sub agencies of Federal Farm Credit Bureau. The sub U.S. agency debt carries the same 20% risk-based capital weighting as the primary U.S. agencies but since it is not senior debt of the primary agency, it is classified as corporate debt in the Corporation's securities portfolio. This leaves $50.1 million of more typically known corporate debt of U.S. and foreign public companies. As a total, the $65.3 million represents 22.6% of the Corporation's total debt securities. Management has a policy limit of maintaining corporate bonds at less than 20% of the securities portfolio and sub agency bonds at less than 5% of the portfolio. Additionally, to limit credit exposure to any one issuer, the Corporation's policy limits investment to $3 million of par value per company. Out of the $65.3 million of total corporate securities, $50.4 million is domestic and $14.9 million is foreign-issued debt. None of the Corporation's foreign corporate debt originates from the European countries that have struggled with the sovereign debt crisis, namely Portugal, Italy, Ireland, Greece, and Spain. Most of the Corporation's foreign-issued debt is from the United Kingdom, Australia, and Canada. Within the corporate bond segment of the portfolio, management has preferred to invest in the banking, brokerage, and finance industry, where management is more comfortable analyzing and evaluating the credit risk of these firms. As a result, based on amortized cost, $37.8 million, or 57.9%, of the corporate bonds held are invested in national or foreign banks, bank holding companies, brokerage firms, or finance companies. In this broader finance-related group, management has selectively pursued foreign bank-issued debt where there is governmental ownership of the bank, and/or implied backing driven by the heavy reliance on these banks for the nation's financial system. Out of the total $37.8 million of financial and brokerage-related corporate issues, $25.9 million is domestic and $11.9 million is foreign. All of the $11.9 million of foreign financial-related corporate paper is in the form of foreign bank-issued debt. Out of the $25.9 million of domestic financial-related debt, $7.1 million is in bank debt, $12.2 million is in brokerage, and $6.6 million is in financial conglomerates. The remaining $27.5 million of non-financial related corporate paper consists of the $15.2 million of sub U.S. agency paper, $4.6 million in phone companies, $2.1 million in domestic medical supplies, $2.0 million in foreign auto, $2.0 million in domestic software, $1.0 million in foreign conglomerates, and $0.6 million in domestic insurance. By internal policy, at time of purchase, all corporate bonds must carry a credit rating of at least A3 by Moody's or A- by S&P, and at all times corporate bonds are to be investment grade, which is defined as Baa3 for Moody's and BBB- for S&P, or above. As of December 31, 2014, all of the Corporation's corporate bonds carried at least a credit rating of A3 by Moody's or A- by S&P.

NOTE P - FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK

The Corporation determines concentrations of credit risk by reviewing loans by borrower, geographical area, and loan purpose. The amount of credit extended to a single borrower or group of borrowers is capped by the legal lending limit, which is defined as 15% of the Bank's risk-based capital, less the allowance for loan losses. The Corporation's lending policy further restricts the amount to 75% of the legal lending limit. As of December 31, 2014, the Corporation's legal lending limit was $14,688,000, and the Corporation's lending policy limit was $11,016,000. This compared to a legal lending limit of $14,068,000, and lending policy limit of $10,551,000 as of December 31, 2013. As of December 31, 2014 and 2013, no lending relationships exceeded the Corporation's internal lending policy limit.

Geographically, the primary lending area for the Corporation encompasses Lancaster, Lebanon, and Berks counties of Pennsylvania, with the vast majority of the loans made in Lancaster County. The ability of debtors to honor their loan agreements is impacted by the health of the local economy. The Corporation's immediate market area benefits from a diverse economy, which has resulted in a diverse loan portfolio. As a community bank, the largest amount of loans outstanding consists of personal mortgages, residential rental loans, and personal loans secured by real estate. Beyond personal lending, the Corporation's business and commercial lending includes loans for agricultural, construction, specialized manufacturing, service industries, many types of small businesses, and loans to governmental units and non-profit entities.

Management evaluates concentrations of credit based on loan purpose on a quarterly basis. The Corporation's greatest concentration of loans by purpose is residential real estate, which comprises $163.3 million, or 34.7%, of the $470.7 million gross loans outstanding. Residential real estate consists of first mortgages and home equity loans. A concentration in commercial real estate of 51.8%, or $243.6 million, also exists; however, within that category there is not a concentration by specific industry type. Agricultural mortgages consist of 29.8% of gross loans as of December 31, 2014, compared to 26.1% as of December 31, 2013; however these agricultural mortgages are spread over several types of agricultural purpose loans. More specifically within these larger purpose categories, management monitors on a quarterly basis the largest concentrations of non-consumer credit based on the North American Industrial Classification System (NAICS). As of December 31, 2014, the largest specific industry type categories were dairy cattle and milk production loans of $81.9 million, or 17.4% of gross loans, non-residential real estate investment loans with a balance of $38.0 million, or 8.1% of gross loans, and residential investment real estate of $29.1 million, or 6.2% of gross loans. Out of the $60.3 million of loans designated as commercial & industrial for the Uniform Bank Performance Reports, the largest concentration within that area is $11.8 million of loans to political subdivisions, which account for 2.5% of gross loans outstanding. For the Corporation, these loans consisted of tax-free loans to local municipalities.

To evaluate risk for the securities portfolio, the Corporation reviews both geographical concentration and credit ratings. The largest geographical concentrations as of December 31, 2014, were obligations of states and political subdivisions located in the states of Pennsylvania, Illinois, Texas, and California. Based on fair market value, the Corporation held $14.6 million of obligations issued by municipalities within the state of Pennsylvania, which is 15.7% of the municipal portfolio, and 5.0% of total debt securities. The Corporation held the same amount of obligations issued by municipalities in the state of Illinois. The Corporation also held $13.6 million of obligations of states and political subdivisions issued by municipalities located within the state of Texas, which is 14.5% of the municipal portfolio, and 4.7% of total debt securities. Finally, the Corporation held $11.5 million of obligations of states and political subdivisions by municipalities in the state of California, which is 12.3% of the municipal portfolio, and 4.0% of total debt securities. Internal policy requires municipal bonds purchased to be rated at least A3 by Moody's and/or A- by Standard & Poor's (S&P) at the time of purchase. Presently, all of the municipal bonds have ratings at these levels or higher.

The Corporation held $65.3 million of corporate bonds based on amortized cost as of December 31, 2014. This total includes $15.2 million of sub U.S. agency debt, in this case sub agencies of Federal Farm Credit Bureau. The sub U.S. agency debt carries the same 20% risk-based capital weighting as the primary U.S. agencies but since it is not senior debt of the primary agency, it is classified as corporate debt in the Corporation's securities portfolio. This leaves $50.1 million of more typically known corporate debt of U.S. and foreign public companies. As a total, the $65.3 million represents 22.6% of the Corporation's total debt securities. Management has a policy limit of maintaining corporate bonds at less than 20% of the securities portfolio and sub agency bonds at less than 5% of the portfolio. Additionally, to limit credit exposure to any one issuer, the Corporation's policy limits investment to $3 million of par value per company. Out of the $65.3 million of total corporate securities, $50.4 million is domestic and $14.9 million is foreign-issued debt. None of the Corporation's foreign corporate debt originates from the European countries that have struggled with the sovereign debt crisis, namely Portugal, Italy, Ireland, Greece, and Spain. Most of the Corporation's foreign-issued debt is from the United Kingdom, Australia, and Canada.

Within the corporate bond segment of the portfolio, management has preferred to invest in the banking, brokerage, and finance industry, where management is more comfortable analyzing and evaluating the credit risk of these firms. As a result, based on amortized cost, $37.8 million, or 57.9%, of the corporate bonds held are invested in national or foreign banks, bank holding companies, brokerage firms, or finance companies. In this broader finance-related group, management has selectively pursued foreign bank-issued debt where there is governmental ownership of the bank, and/or implied backing driven by the heavy reliance on these banks for the nation's financial system. Out of the total $37.8 million of financial and brokerage-related corporate issues, $25.9 million is domestic and $11.9 million is foreign. All of the $11.9 million of foreign financial-related corporate paper is in the form of foreign bank-issued debt. Out of the $25.9 million of domestic financial-related debt, $7.1 million is in bank debt, $12.2 million is in brokerage, and $6.6 million is in financial conglomerates.

The remaining $27.5 million of non-financial related corporate paper consists of the $15.2 million of sub U.S. agency paper, $4.6 million in phone companies, $2.1 million in domestic medical supplies, $2.0 million in foreign auto, $2.0 million in domestic software, $1.0 million in foreign conglomerates, and $0.6 million in domestic insurance.

By internal policy, at time of purchase, all corporate bonds must carry a credit rating of at least A3 by Moody's or A- by S&P, and at all times corporate bonds are to be investment grade, which is defined as Baa3 for Moody's and BBB- for S&P, or above. As of December 31, 2014, all of the Corporation's corporate bonds carried at least a credit rating of A3 by Moody's or A- by S&P.