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Credit Quality and Related Allowance for Loan Losses (Tables)
 9 Months Ended
Sep. 30, 2014
Loans and Leases Receivable Disclosure [Abstract]  
Schedule of related aging categories of loans by segment
The following table presents the related aging categories of loans, by segment, as of September 30, 2014 and December 31, 2013:
 
 
 
September 30, 2014
 
 
 
 
Past Due
 
Past Due 90
 
 
 
 
 
 
 
 
30 To 89
 
Days Or More
 
Non-
 
 
(In Thousands)
 
Current
 
Days
 
& Still Accruing
 
Accrual
 
Total
Commercial and agricultural
 
$
123,317

 
$
142

 
$
—

 
$
820

 
$
124,279

Real estate mortgage:
 
 

 
 

 
 

 
 

 
 

Residential
 
432,722

 
1,742

 
202

 
808

 
435,474

Commercial
 
277,696

 
2,235

 
—

 
9,452

 
289,383

Construction
 
21,132

 
10

 
—

 
1,012

 
22,154

Installment loans to individuals
 
20,408

 
311

 
—

 
—

 
20,719

 
 
875,275

 
$
4,440

 
$
202

 
$
12,092

 
892,009

Net deferred loan fees and discounts
 
(1,282
)
 
 

 
 

 
 

 
(1,282
)
Allowance for loan losses
 
(9,250
)
 
 

 
 

 
 

 
(9,250
)
Loans, net
 
$
864,743

 
 

 
 

 
 

 
$
881,477

 
 
December 31, 2013
 
 
 
 
Past Due
 
Past Due 90
 
 
 
 
 
 
 
 
30 To 89
 
Days Or More
 
Non-
 
 
(In Thousands)
 
Current
 
Days
 
& Still Accruing
 
Accrual
 
Total
Commercial and agricultural
 
$
104,419

 
$
502

 
$
—

 
$
108

 
$
105,029

Real estate mortgage:
 
 

 
 

 
 

 
 

 
 

Residential
 
392,300

 
6,424

 
531

 
526

 
399,781

Commercial
 
272,745

 
2,533

 
—

 
7,198

 
282,476

Construction
 
15,967

 
—

 
73

 
1,242

 
17,282

Installment loans to individuals
 
14,170

 
477

 
—

 
—

 
14,647

 
 
799,601

 
$
9,936

 
$
604

 
$
9,074

 
819,215

Net deferred loan fees and discounts
 
(871
)
 
 

 
 

 
 

 
(871
)
Allowance for loan losses
 
(10,144
)
 
 

 
 

 
 

 
(10,144
)
Loans, net
 
$
788,586

 
 

 
 

 
 

 
$
808,200
Schedule of changes in the amortizable yield for purchased credit-impaired loans
Changes in the amortizable yield for purchased credit-impaired loans were as follows for the nine months ended September 30, 2014 and 2013:
(In Thousands)
 
September 30, 2014
 
September 30, 2013
Balance at beginning of period or at acquisition
 
$
35

 
$
63

Accretion
 
(12
)
 
(17
)
Balance at end of period
 
$
23

 
$
46
Schedule of additional information regarding loans acquired and accounted
The following table presents additional information regarding loans acquired in the Luzerne Bank transaction with specific evidence of deterioration in credit quality:
(In Thousands)
 
September 30, 2014
 
December 31, 2013
Outstanding balance
 
$
755

 
$
1,224

Carrying amount
 
655

 
868
Schedule of interest income if interest had been recorded based on the original loan agreement terms and rate of interest for non-accrual loans and interest income recognized on a cash basis for non-accrual loans
The following table presents interest income the Bank would have recorded if interest had been recorded based on the original loan agreement terms and rate of interest for non-accrual loans and interest income recognized on a cash basis for non-accrual loans for the three and nine months ended September 30, 2014 and 2013:
 
 
 
Three Months Ended September 30,
 
 
2014
 
2013
(In Thousands)
 
Interest Income That
Would Have Been
Recorded Based on
Original Term and Rate
 
Interest
Income
Recorded on
a Cash Basis
 
Interest Income That
Would Have Been
Recorded Based on
Original Term and Rate
 
Interest
Income
Recorded on
a Cash Basis
Commercial and agricultural
 
$
17

 
$
20

 
$
—

 
$
—

Real estate mortgage:
 
 

 
 

 
 

 
 

Residential
 
31

 
8

 
13

 
10

Commercial
 
147

 
66

 
49

 
5

Construction
 
18

 
—

 
16

 
8

 
 
$
213

 
$
94

 
$
78

 
$
23

 
 
Nine Months Ended September 30,
 
 
2014
 
2013
(In Thousands)
 
Interest Income That
Would Have Been
Recorded Based on
Original Term and Rate
 
Interest
Income
Recorded on
a Cash Basis
 
Interest Income That
Would Have Been
Recorded Based on
Original Term and Rate
 
Interest
Income
Recorded on
a Cash Basis
Commercial and agricultural
 
$
34

 
$
21

 
$
4

 
$
—

Real estate mortgage:
 
 

 
 

 
 

 
 

Residential
 
38

 
17

 
67

 
22

Commercial
 
422

 
152

 
165

 
89

Construction
 
53

 
—

 
97

 
33

 
 
$
547

 
$
190

 
$
333

 
$
144
Schedule of recorded investment, unpaid principal balance, and related allowance of impaired loans by segment
The following table presents the recorded investment, unpaid principal balance, and related allowance of impaired loans by segment as of September 30, 2014 and December 31, 2013:
 
 
 
September 30, 2014
 
 
Recorded
 
Unpaid Principal
 
Related
(In Thousands)
 
Investment
 
Balance
 
Allowance
With no related allowance recorded:
 
 

 
 

 
 

Commercial and agricultural
 
$
620

 
$
620

 
$
—

Real estate mortgage:
 
 

 
 

 
 

Residential
 
613

 
713

 
—

Commercial
 
2,601

 
2,601

 
—

Construction
 
510

 
510

 
—

 
 
4,344

 
4,444

 
—

With an allowance recorded:
 
 

 
 

 
 

Commercial and agricultural
 
516

 
516

 
150

Real estate mortgage:
 
 

 
 

 
 

Residential
 
741

 
764

 
80

Commercial
 
8,335

 
8,834

 
1,079

Construction
 
805

 
1,660

 
171

 
 
10,397

 
11,774

 
1,480

Total:
 
 

 
 

 
 

Commercial and agricultural
 
1,136

 
1,136

 
150

Real estate mortgage:
 
 

 
 

 
 

Residential
 
1,354

 
1,477

 
80

Commercial
 
10,936

 
11,435

 
1,079

Construction
 
1,315

 
2,170

 
171

 
 
$
14,741

 
$
16,218

 
$
1,480

 
 
December 31, 2013
 
 
Recorded
 
Unpaid Principal
 
Related
(In Thousands)
 
Investment
 
Balance
 
Allowance
With no related allowance recorded:
 
 

 
 

 
 

Commercial and agricultural
 
$
—

 
$
—

 
$
—

Real estate mortgage:
 
 

 
 

 
 

Residential
 
916

 
1,173

 
—

Commercial
 
623

 
879

 
—

Construction
 
528

 
528

 
—

 
 
2,067

 
2,580

 
—

With an allowance recorded:
 
 

 
 

 
 

Commercial and agricultural
 
532

 
532

 
224

Real estate mortgage:
 
 

 
 

 
 

Residential
 
319

 
342

 
65

Commercial
 
7,598

 
7,742

 
2,153

Construction
 
512

 
1,367

 
113

 
 
8,961

 
9,983

 
2,555

Total:
 
 

 
 

 
 

Commercial and agricultural
 
532

 
532

 
224

Real estate mortgage:
 
 

 
 

 
 

Residential
 
1,235

 
1,515

 
65

Commercial
 
8,221

 
8,621

 
2,153

Construction
 
1,040

 
1,895

 
113

 
 
$
11,028

 
$
12,563

 
$
2,555
Schedule of average recorded investment in impaired loans and related interest income recognized
The following table presents the average recorded investment in impaired loans and related interest income recognized for the three and nine months ended for September 30, 2014 and 2013:
 
 
Three Months Ended September 30,
 
 
2014
 
2013
(In Thousands)
 
Average
Investment in
Impaired Loans
 
Interest Income
Recognized on an
Accrual Basis on
Impaired Loans
 
Interest Income
Recognized on a
Cash Basis on
Impaired Loans
 
Average
Investment in
Impaired Loans
 
Interest Income
Recognized on an
Accrual Basis on
Impaired Loans
 
Interest Income
Recognized on a
Cash Basis on
Impaired Loans
Commercial and agricultural
 
$
824

 
$
5

 
$
20

 
$
786

 
$
7

 
$
—

Real estate mortgage:
 
 

 
 

 
 

 
 

 
 

 
 

Residential
 
1,219

 
18

 
7

 
1,652

 
28

 
10

Commercial
 
10,901

 
34

 
65

 
8,277

 
45

 
5

Construction
 
1,169

 
8

 
—

 
1,119

 
1

 
8

 
 
$
14,113

 
$
65

 
$
92

 
$
11,834

 
$
81

 
$
23

 
 
Nine Months Ended September 30,
 
 
2014
 
2013
(In Thousands)
 
Average
Investment in
Impaired Loans
 
Interest Income
Recognized on an
Accrual Basis on
Impaired Loans
 
Interest Income
Recognized on a
Cash Basis on
Impaired Loans
 
Average
Investment in
Impaired Loans
 
Interest Income
Recognized on an
Accrual Basis on
Impaired Loans
 
Interest Income
Recognized on a
Cash Basis on
Impaired Loans
Commercial and agricultural
 
$
675

 
$
18

 
$
20

 
$
869

 
$
20

 
$
—

Real estate mortgage:
 
 

 
 

 
 

 
 

 
 

 
 

Residential
 
1,195

 
32

 
14

 
2,110

 
45

 
21

Commercial
 
10,240

 
95

 
79

 
11,278

 
138

 
89

Construction
 
1,102

 
10

 
8

 
4,071

 
1

 
561

 
 
$
13,212

 
$
155

 
$
121

 
$
18,328

 
$
204

 
$
671
Schedule of loan modifications that are considered TDRs
Loan modifications that are considered TDRs completed during the three and nine months ended September 30, 2014 and 2013 were as follows:
 
 
 
Three Months Ended September 30,
 
 
2014
 
2013
(In Thousands, Except Number of Contracts)
 
Number
of
Contracts
 
Pre-Modification Outstanding Recorded Investment
 
Post-Modification Outstanding Recorded Investment
 
Number
of
Contracts
 
Pre-Modification Outstanding Recorded Investment
 
Post-Modification Outstanding Recorded Investment
Commercial and agricultural
 
3

 
$
620

 
$
620

 
—

 
$
—

 
$
—

Real estate mortgage:
 
 

 
 

 
 

 
 
 
 
 
 
Residential
 
1

 
105

 
105

 
—

 
—

 
—

Commercial
 
3

 
636

 
636

 
2

 
1,634

 
1,634

 
 
7

 
$
1,361

 
$
1,361

 
2

 
$
1,634

 
$
1,634

 
 
Nine Months Ended September 30,
 
 
2014
 
2013
(In Thousands, Except Number of Contracts)
 
Number
of
Contracts
 
Pre-Modification
Outstanding
Recorded
Investment
 
Post-Modification
Outstanding
Recorded
Investment
 
Number
of
Contracts
 
Pre-Modification
Outstanding
Recorded
Investment
 
Post-Modification
Outstanding
Recorded
Investment
Commercial and agricultural
 
3

 
$
620

 
$
620

 
—

 
$
—

 
$
—

Real estate mortgage:
 
 

 
 

 
 

 
 

 
 

 
 

Residential
 
1

 
105

 
105

 
2

 
61

 
61

Commercial
 
3

 
636

 
636

 
4

 
1,898

 
1,898

 
 
7

 
$
1,361

 
$
1,361

 
6

 
$
1,959

 
$
1,959
Schedule of credit quality categories
The following table presents the credit quality categories identified above as of September 30, 2014 and December 31, 2013:
 
 
September 30, 2014
 
 
Commercial and
 
Real Estate Mortgages
 
Installment Loans
 
 
(In Thousands)
 
Agricultural
 
Residential
 
Commercial
 
Construction
 
to Individuals
 
Totals
Pass
 
$
116,755

 
$
433,579

 
$
266,751

 
$
21,442

 
$
20,719

 
$
859,246

Special Mention
 
6,240

 
1,476

 
7,674

 
216

 
—

 
15,606

Substandard
 
1,284

 
419

 
14,958

 
496

 
—

 
17,157

 
 
$
124,279

 
$
435,474

 
$
289,383

 
$
22,154

 
$
20,719

 
$
892,009

 
 
 
December 31, 2013
 
 
Commercial and
 
Real Estate Mortgages
 
Installment Loans
 
 
(In Thousands)
 
Agricultural
 
Residential
 
Commercial
 
Construction
 
to Individuals
 
Totals
Pass
 
$
99,256

 
$
398,327

 
$
259,505

 
$
13,608

 
$
14,647

 
$
785,343

Special Mention
 
4,529

 
598

 
10,181

 
214

 
—

 
15,522

Substandard
 
1,244

 
856

 
12,790

 
3,460

 
—

 
18,350

 
 
$
105,029

 
$
399,781

 
$
282,476

 
$
17,282

 
$
14,647

 
$
819,215
Schedule of activity in the allowance
Activity in the allowance is presented for the three and nine months ended September 30, 2014 and 2013:
 
 
Three Months Ended September 30, 2014
 
 
Commercial and
 
Real Estate Mortgages
 
Installment Loans
 
 
 
 
(In Thousands)
 
Agricultural
 
Residential
 
Commercial
 
Construction
 
to Individuals
 
Unallocated
 
Totals
Beginning Balance
 
$
694

 
$
3,262

 
$
3,394

 
$
718

 
$
198

 
$
545

 
$
8,811

Charge-offs
 
—

 
(2
)
 
—

 
—

 
(36
)
 
—

 
(38
)
Recoveries
 
1

 
6

 
—

 
—

 
10

 
—

 
17

Provision
 
133

 
157

 
283

 
67

 
64

 
(244
)
 
460

Ending Balance
 
$
828

 
$
3,423

 
$
3,677

 
$
785

 
$
236

 
$
301

 
$
9,250

 
 
 
Three Months Ended September 30, 2013
 
 
Commercial and
 
Real Estate Mortgages
 
Installment Loans
 
 
 
 
(In Thousands)
 
Agricultural
 
Residential
 
Commercial
 
Construction
 
to Individuals
 
Unallocated
 
Totals
Beginning Balance
 
$
540

 
$
3,045

 
$
3,988

 
$
843

 
$
141

 
$
847

 
$
9,404

Charge-offs
 
—

 
(105
)
 
(193
)
 
(100
)
 
(29
)
 
—

 
(427
)
Recoveries
 
39

 
(2
)
 
1

 
1

 
14

 
—

 
53

Provision
 
(59
)
 
520

 
(31
)
 
8

 
14

 
148

 
600

Ending Balance
 
$
520

 
$
3,458

 
$
3,765

 
$
752

 
$
140

 
$
995

 
$
9,630

 
 
 
Nine Months Ended September 30, 2014
 
 
Commercial and
 
Real Estate Mortgages
 
Installment Loans
 
 
 
 
(In Thousands)
 
Agricultural
 
Residential
 
Commercial
 
Construction
 
to Individuals
 
Unallocated
 
Totals
Beginning Balance
 
$
474

 
$
3,917

 
$
4,079

 
$
741

 
$
139

 
$
794

 
$
10,144

Charge-offs
 
—

 
(65
)
 
(2,038
)
 
—

 
(104
)
 
—

 
(2,207
)
Recoveries
 
12

 
9

 
—

 
—

 
47

 
—

 
68

Provision
 
342

 
(438
)
 
1,636

 
44

 
154

 
(493
)
 
1,245

Ending Balance
 
$
828

 
$
3,423

 
$
3,677

 
$
785

 
$
236

 
$
301

 
$
9,250

 
 
Nine Months Ended September 30, 2013
 
 
Commercial and
 
Real Estate Mortgages
 
Installment Loans
 
 
 
 
(In Thousands)
 
Agricultural
 
Residential
 
Commercial
 
Construction
 
to Individuals
 
Unallocated
 
Totals
Beginning Balance
 
$
361

 
$
1,954

 
$
3,831

 
$
950

 
$
144

 
$
377

 
$
7,617

Charge-offs
 
—

 
(239
)
 
(199
)
 
(100
)
 
(79
)
 
—

 
(617
)
Recoveries
 
52

 
3

 
7

 
851

 
42

 
—

 
955

Provision
 
107

 
1,740

 
126

 
(949
)
 
33

 
618

 
1,675

Ending Balance
 
$
520

 
$
3,458

 
$
3,765

 
$
752

 
$
140

 
$
995

 
$
9,630
Schedule of concentration of loan
The Company has a concentration of loans at September 30, 2014 and 2013 as follows:
 
 
 
September 30,
 
 
2014
 
2013
Owners of residential rental properties
 
15.98
%
 
15.73
%
Owners of commercial rental properties
 
14.90
%
 
13.20
%
Schedule of allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of September 30, 2014 and December 31, 2013:
 
 
September 30, 2014
 
 
Commercial and
 
Real Estate Mortgages
 
Installment Loans
 
 
 
 
(In Thousands)
 
Agricultural
 
Residential
 
Commercial
 
Construction
 
to Individuals
 
Unallocated
 
Totals
Allowance for Loan Losses:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Ending allowance balance attributable to loans:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
 
$
150

 
$
80

 
$
1,079

 
$
171

 
$
—

 
$
—

 
$
1,480

Collectively evaluated for impairment
 
678

 
3,343

 
2,598

 
614

 
236

 
301

 
7,770

Total ending allowance balance
 
$
828

 
$
3,423

 
$
3,677

 
$
785

 
$
236

 
$
301

 
$
9,250

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
 
$
1,136

 
$
1,005

 
$
10,630

 
$
1,315

 
$
—

 


 
$
14,086

Loans acquired with deteriorated credit quality
 
—

 
349

 
306

 
—

 
—

 


 
655

Collectively evaluated for impairment
 
123,143

 
434,120

 
278,447

 
20,839

 
20,719

 


 
877,268

Total ending loans balance
 
$
124,279

 
$
435,474

 
$
289,383

 
$
22,154

 
$
20,719

 


 
$
892,009

 
 
 
December 31, 2013
 
 
Commercial and
 
Real Estate Mortgages
 
Installment Loans
 
 
 
 
(In Thousands)
 
Agricultural
 
Residential
 
Commercial
 
Construction
 
to Individuals
 
Unallocated
 
Totals
Allowance for Loan Losses:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Ending allowance balance attributable to loans:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
 
$
224

 
$
65

 
$
2,153

 
$
113

 
$
—

 
$
—

 
$
2,555

Collectively evaluated for impairment
 
250

 
3,852

 
1,926

 
628

 
139

 
794

 
7,589

Total ending allowance balance
 
$
474

 
$
3,917

 
$
4,079

 
$
741

 
$
139

 
$
794

 
$
10,144

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
 
$
532

 
$
881

 
$
7,707

 
$
1,040

 
$
—

 
 

 
$
10,160

Loans acquired with deteriorated credit quality
 
—

 
354

 
514

 
—

 
 
 
 
 
868

Collectively evaluated for impairment
 
104,497

 
398,546

 
274,255

 
16,242

 
14,647

 
 

 
808,187

Total ending loans balance
 
$
105,029

 
$
399,781

 
$
282,476

 
$
17,282

 
$
14,647

 
 

 
$
819,215