Loans (Tables)

6 Months Ended

Jun. 30, 2021

Loans [Abstract]

Loan Portfolio and Allowance for Loan Losses

The Company grants loans primarily to customers throughout north central, central and south central Pennsylvania and the southern tier of New York. The recently completed MidCoast acquisition has expanded our lending market into Wilmington and Dover, Delaware.   Although the Company had a diversified loan portfolio at June 30, 2021 and December 31, 2020, a substantial portion of its debtors’ ability to honor their contracts is dependent on the economic conditions within these regions. The following table summarizes the primary segments of the loan portfolio and how those segments are analyzed within the allowance for loan losses as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021	Total Loans		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Collectively evaluated for impairment
Real estate loans:
Residential	$	202,171	$	708	$	19	$	201,444
Commercial		641,633		8,844		2,235		630,554
Agricultural		310,274		4,490		1,647		304,137
Construction		63,065		-		-		63,065
Consumer		8,684		-		-		8,684
Other commercial loans		104,349		933		43		103,373
Other agricultural loans		33,720		1,047		-		32,673
State and political subdivision loans		51,213		-		-		51,213
Total		1,415,109		16,022		3,944		1,395,143
Allowance for loan losses		16,931		269		-		16,662
Net loans	$	1,398,178	$	15,753	$	3,944	$	1,378,481

December 31, 2020	Total Loans		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Collectively evaluated for impairment
Real estate loans:
Residential	$	201,911	$	990	$	20	$	200,901
Commercial		596,255		9,183		2,937		584,135
Agricultural		315,158		4,645		1,686		308,827
Construction		35,404		-		-		35,404
Consumer		30,277		2		-		30,275
Other commercial loans		114,169		1,335		232		112,602
Other agricultural loans		48,779		1,122		-		47,657
State and political subdivision loans		63,328		-		-		63,328
Total		1,405,281		17,277		4,875		1,383,129
Allowance for loan losses		15,815		510		-		15,305
Net loans	$	1,389,466	$	16,767	$	4,875	$	1,367,824

Purchase Accounting Adjustments Related to Purchased Impaired Loans Acquired

The table below presents the components of the purchase accounting adjustments related to the purchased impaired loans acquired in the MidCoast Acquisition as of April 17, 2020 (in thousands):

	April 17, 2020
Contractually required principal and interest at acquisition	$	8,801
Non-accretable  discount		(2,966	)
Expected cash flows		5,835
Accretable discount	$	(966	)
Estimated fair value	$	4,869

Accretable Yield for Purchased Credit Impaired Loans

Changes in the accretable yield for PCI loans were as follows for the three and six months ended June 30, 2021 and 2020 (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
Balance at beginning of period	$	688		$	88		$	788		$	89
Acquisition of Midcoast		-			966			-			966
Accretion		(104	)		(67	)		(204	)		(68	)
Balance at end of period	$	584		$	987		$	584		$	987

Loans Acquired with Specific Evidence of Deterioration in Credit Quality

The following table presents additional information regarding loans acquired with specific evidence of deterioration in credit quality under ASC 310-30 (in thousands):

	June 30, 2021		December 31, 2020
Outstanding balance	$	7,092	$	8,958
Carrying amount		3,944		4,875

Impaired Loan Receivables with Associated Allowance Amount

The following table includes the recorded investment and unpaid principal balances for impaired loan receivables by class, excluding PCI loans, with the associated allowance amount, if applicable (in thousands):

June 30, 2021	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Real estate loans:
Mortgages	$	766	$	574	$	48	$	622	$	9
Home Equity		103		40		46		86		7
Commercial		9,691		7,941		903		8,844		97
Agricultural		4,742		2,756		1,734		4,490		12
Consumer		-		-		-		-		-
Other commercial loans		1,572		832		101		933		35
Other agricultural loans		1,247		15		1,032		1,047		109
Total	$	18,121	$	12,158	$	3,864	$	16,022	$	269

December 31, 2020
Real estate loans:
Mortgages	$	1,070	$	740	$	123	$	863	$	9
Home Equity		150		70		57		127		9
Commercial		9,847		8,323		860		9,183		95
Agricultural		4,811		2,799		1,846		4,645		83
Consumer		2		2		-		2		-
Other commercial loans		1,908		1,094		241		1,335		170
Other agricultural loans		1,262		19		1,103		1,122		144
Total	$	19,050	$	13,047	$	4,230	$	17,277	$	510

The following tables includes the average balance of impaired loan receivables by class and the income recognized on these receivables for the three and six month periods ended June 30, 2021 and 2020 (in thousands):

	For the Six Months Ended
	June 30, 2021						June 30, 2020
	Average Recorded Investment		Interest Income Recognized		Interest Income Recognized Cash Basis		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized Cash Basis
Real estate loans:
Mortgages	$	784	$	8	$	-	$	1,047	$	10	$	-
Home Equity		117		3		-		144		3		-
Commercial		9,009		134		15		11,529		219		2
Agricultural		4,543		43		-		3,761		40		-
Consumer		1		-		-		3		-		-
Other commercial loans		1,072		1		-		1,822		2		-
Other agricultural loans		1,093		3		-		1,283		4		-
Total	$	16,619	$	192	$	15	$	19,589	$	278	$	2

	For the Three Months Ended
	June 30, 2021						June 30, 2020
	Average Recorded Investment		Interest Income Recognized		Interest Income Recognized Cash Basis		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized Cash Basis
Real estate loans:
Mortgages	$	718	$	3	$	-	$	1,062	$	5	$	-
Home Equity		109		2		-		142		1		-
Commercial		8,781		67		8		11,572		115		-
Agricultural		4,497		21		-		3,746		19		-
Consumer		-		-		-		2		-		-
Other commercial loans		1,023		-		-		1,805		1		-
Other agricultural loans		1,082		1		-		1,290		2		-
Total	$	16,210	$	94	$	8	$	19,619	$	143	$	-

Financing Receivable Credit Exposures by Internally Assigned Grades

The following tables represent credit exposures by internally assigned grades as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	610,776	$	24,148	$	6,709	$	-	$	-	$	641,633
Agricultural		290,149		10,068		10,057		-		-		310,274
Construction		63,065		-		-		-		-		63,065
Other commercial loans		97,731		3,038		3,528		52		-		104,349
Other agricultural loans		31,594		923		1,203		-		-		33,720
State and political subdivision loans		46,602		4,372		239		-		-		51,213
Total	$	1,139,917	$	42,549	$	21,736	$	52	$	-	$	1,204,254

December 31, 2020	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	563,121	$	24,329	$	8,805	$	-	$	-	$	596,255
Agricultural		289,216		14,307		11,635		-		-		315,158
Construction		35,404		-		-		-		-		35,404
Other commercial loans		106,604		3,808		3,672		85		-		114,169
Other agricultural loans		45,758		1,431		1,590		-		-		48,779
State and political subdivision loans		58,649		4,372		307		-		-		63,328
Total	$	1,098,752	$	48,247	$	26,009	$	85	$	-	$	1,173,093

For residential real estate mortgages, home equity and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail below, and all loans past due 90 or more days and still accruing. The following table presents the recorded investment in those loan classes based on payment activity as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	149,149	$	579	$	19	$	149,747
Home Equity		52,403		21		-		52,424
Consumer		8,684		-		-		8,684
Total	$	210,236	$	600	$	19	$	210,855
December 31, 2020	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	145,843	$	1,039	$	20	$	146,902
Home Equity		54,961		48		-		55,009
Consumer		30,247		30		-		30,277
Total	$	231,051	$	1,117	$	20	$	232,188

Aging Analysis of Past Due Loan Receivables

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table includes an aging analysis of the recorded investment of past due loan receivables as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		PCI		Total Loans Receivables		90 Days or Greater and Accruing
Real estate loans:
Mortgages	$	415	$	30	$	207	$	652	$	149,076	$	19	$	149,747	$	37
Home Equity		81		9		8		98		52,326		-		52,424		2
Commercial		667		1,340		1,269		3,276		636,122		2,235		641,633		10
Agricultural		329		43		1,180		1,552		307,075		1,647		310,274		-
Construction		-		-		-		-		63,065		-		63,065		-
Consumer		159		3		-		162		8,522		-		8,684		-
Other commercial loans		-		832		-		832		103,474		43		104,349		-
Other agricultural loans		-		4		-		4		33,716		-		33,720		-
State and political subdivision loans		-		-		-		-		51,213		-		51,213		-
Total	$	1,651	$	2,261	$	2,664	$	6,576	$	1,404,589	$	3,944	$	1,415,109	$	49
Loans considered non-accrual	$	426	$	1,992	$	2,615	$	5,033	$	4,049	$	-	$	9,082
Loans still accruing		1,225		269		49		1,543		1,400,540		3,944		1,406,027
Total	$	1,651	$	2,261	$	2,664	$	6,576	$	1,404,589	$	3,944	$	1,415,109

December 31, 2020	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		PCI		Total Loans Receivables		90 Days or Greater and Accruing
Real estate loans:
Mortgages	$	864	$	414	$	518	$	1,796	$	145,086	$	20	$	146,902	$	252
Home Equity		152		62		34		248		54,761		-		55,009		23
Commercial		836		439		1,822		3,097		590,221		2,937		596,255		70
Agricultural		2,283		-		1,329		3,612		309,860		1,686		315,158		150
Construction		-		-		-		-		35,404		-		35,404		-
Consumer		147		9		30		186		30,091		-		30,277		30
Other commercial loans		930		-		133		1,063		112,874		232		114,169		-
Other agricultural loans		1,044		-		-		1,044		47,735		-		48,779		-
State and political subdivision loans		-		-		-		-		63,328		-		63,328		-
Total	$	6,256	$	924	$	3,866	$	11,046	$	1,389,360	$	4,875	$	1,405,281	$	525
Loans considered non-accrual	$	3,032	$	28	$	3,341	$	6,401	$	4,331	$	-	$	10,732
Loans still accruing		3,224		896		525		4,645		1,385,029		4,875		1,394,549
Total	$	6,256	$	924	$	3,866	$	11,046	$	1,389,360	$	4,875	$	1,405,281

Loan Receivables on Nonaccrual Status

The following table reflects the loan receivables, excluding PCI loans, on non-accrual status as of June 30, 2021 and December 31, 2020, respectively. The balances are presented by class of loan receivable (in thousands):

	June 30, 2021		December 31, 2020
Real estate loans:
Mortgages	$	542	$	787
Home Equity		19		25
Commercial		3,699		4,529
Agricultural		3,039		3,133
Other commercial loans		884		1,284
Other agricultural loans		899		974
	$	9,082	$	10,732

Loan Modifications Related to COVID-19

The Company has elected to follow the loan modification guidance under Section 4013 of the CARES Act with regard to COVID-19 modifications made between March 1, 2020 and the earlier of either January 1, 2022 or the 60th day after the end of the COVID-19 national emergency. Under section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 modifications. A financial institution can then suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a TDR, and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Similarly, the Financial Accounting Standards Board has confirmed that short-term modifications made on a good-faith basis in response to COVID-19 to loan customers who were current prior to any relief are not TDRs. A modification of six months or less is considered to be a short-term loan modification. In response to the COVID-19 pandemic, the Company has prudently executed loan modifications for existing loan customers, which includes deferrals of interest and in certain cases deferrals of principal and interest. The following table presents information regarding loans which were subject to a loan modification related to COVID-19 during 2021, with balances as of December 31, 2020 and June 30, 2021, as well as the balance by modification type as of June 30, 2021 (dollars in thousands).

	Number of loans		Balance as of December 31, 2020		Number of loans		Balance as of June 30, 2021		Principal and Interest Deferral		Principal Deferral		% of loans as of June 30, 2021
Real estate loans:
Mortgages		1	$	209		-	$	-	$	-	$	-		0.00	%
Home Equity		1		49		-		-		-		-		0.00	%
Commercial		12		26,039		1		6,205		6,205		-		0.97	%
Agricultural		3		181		-		-		-		-		0.00	%
Construction		-		-		-		-		-		-		0.00	%
Consumer		-		-		-		-		-		-		0.00	%
Other commercial loans		2		249		-		-		-		-		0.00	%
Other agricultural loans		-		-		-		-		-		-		0.00	%
Total		19	$	26,727		1	$	6,205	$	6,205	$	-		0.44	%

Troubled Debt Restructurings on Financing Receivables

Loan modifications that are considered TDRs completed during the three and six months ended June 30, 2021 and 2020 were as follows (dollars in thousands):

	For the Three Months Ended June 30, 2021
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		1	$	-	$	1,117	$	-	$	1,117
Total		-		1	$	-	$	1,117	$	-	$	1,117

	For the Six Months Ended June 30, 2021
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		3		-		1,407		-		1,407
Total		-		3	$	-	$	1,407	$	-	$	1,407

	For the Three Months Ended June 30, 2020
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		2	$	-	$	406	$	-	$	406
Total		-		2	$	-	$	406	$	-	$	406

	For the Six Months Ended June 30, 2020
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		2	$	-	$	406	$	-	$	406
Agricultural		-		1		-		150		-		150
Total		-		3	$	-	$	556	$	-	$	556

Allowance for Loan Losses by Impairment Method

The following table segregates the allowance for loan losses (ALLL) into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of June 30, 2021 and December 31, 2020, respectively (in thousands):

	June 30, 2021						December 31, 2020
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
Real estate loans:
Residential	$	16	$	1,158	$	1,174	$	18	$	1,156	$	1,174
Commercial		97		7,009		7,106		95		6,121		6,216
Agricultural		12		4,694		4,706		83		4,870		4,953
Construction		-		496		496		-		122		122
Consumer		-		85		85		-		321		321
Other commercial loans		35		1,293		1,328		170		1,056		1,226
Other agricultural loans		109		474		583		144		720		864
State and political subdivision loans		-		404		404		-		479		479
Unallocated		-		1,049		1,049		-		460		460
Total	$	269	$	16,662	$	16,931	$	510	$	15,305	$	15,815

Roll forward of Allowance for Loan Losses by Portfolio Segment

The following tables roll forward the balance of the ALLL by portfolio segment for the three and six months ended June 30, 2021 and 2020, respectively (in thousands):

	For the three months ended June 30, 2021
	Balance at March 31, 2021		Charge-offs			Recoveries		Provision			Balance at June 30, 2021
Real estate loans:
Residential	$	1,167	$	-		$	-	$	7		$	1,174
Commercial		6,683		-			-		423			7,106
Agricultural		4,917		-			-		(211	)		4,706
Construction		151		-			-		345			496
Consumer		237		(5	)		6		(153	)		85
Other commercial loans		1,504		(133	)		3		(46	)		1,328
Other agricultural loans		789		-			-		(206	)		583
State and political subdivision loans		470		-			-		(66	)		404
Unallocated		642		-			-		407			1,049
Total	$	16,560	$	(138	)	$	9	$	500		$	16,931

	For the three months ended June 30, 2020
	Balance at March 31, 2020		Charge-offs			Recoveries		Provision			Balance at June 30, 2020
Real estate loans:
Residential	$	1,154	$	-		$	-	$	52		$	1,206
Commercial		4,729		-			33		182			4,944
Agricultural		4,878		-			-		183			5,061
Construction		56		-			-		25			81
Consumer		117		(10	)		4		251			362
Other commercial loans		1,297		-			3		(99	)		1,201
Other agricultural loans		835		-			-		(14	)		821
State and political subdivision loans		558		-			-		(11	)		547
Unallocated		623		-			-		(19	)		604
Total	$	14,247	$	(10	)	$	40	$	550		$	14,827

	For the six months ended June 30, 2021
	Balance at December 31, 2020		Charge-offs			Recoveries		Provision			Balance at June 30, 2021
Real estate loans:
Residential	$	1,174	$	-		$	-	$	-		$	1,174
Commercial		6,216		-			89		801			7,106
Agricultural		4,953		-			-		(247	)		4,706
Construction		122		-			-		374			496
Consumer		321		(9	)		12		(239	)		85
Other commercial loans		1,226		(133	)		7		228			1,328
Other agricultural loans		864		-			-		(281	)		583
State and political subdivision loans		479		-			-		(75	)		404
Unallocated		460		-			-		589			1,049
Total	$	15,815	$	(142	)	$	108	$	1,150		$	16,931

	For the six months ended June 30, 2020
	Balance at December 31, 2019		Charge-offs			Recoveries		Provision			Balance at June 30, 2020
Real estate loans:
Residential	$	1,114	$	-		$	-	$	92		$	1,206
Commercial		4,549		(1	)		34		362			4,944
Agricultural		5,022		-			-		39			5,061
Construction		43		-			-		38			81
Consumer		112		(18	)		12		256			362
Other commercial loans		1,255		-			5		(59	)		1,201
Other agricultural loans		961		-			-		(140	)		821
State and political subdivision loans		536		-			-		11			547
Unallocated		253		-			-		351			604
Total	$	13,845	$	(19	)	$	51	$	950		$	14,827