Note 8 - Borrowed Funds

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

8. BORROWED FUNDS

SHORT-TERM BORROWINGS

Short-term borrowings include the following:

(In Thousands)	June 30,	Dec. 31
	2015	2014
FHLB-Pittsburgh borrowings	$15,000	$0
Customer repurchase agreements	4,806	5,537
Total short-term borrowings	$19,806	$5,537

The FHLB-Pittsburgh loan facilities are collateralized by qualifying loans secured by real estate with a book value totaling $443,861,000 at June 30, 2015 and $446,780,000 at December 31, 2014. Also, the FHLB-Pittsburgh loan facilities require the Corporation to invest in established amounts of FHLB-Pittsburgh stock. The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in Other Assets) were $2,372,000 at June 30, 2015 and $1,454,000 at December 31, 2014.

The short-term borrowing from the FHLB-Pittsburgh is an overnight borrowing and has an interest rate of 0.34%.

The Corporation engages in repurchase agreements with certain commercial customers. These agreements provide that the Corporation sells specified investment securities to the customers on an overnight basis and repurchases them on the following business day. The weighted average rate paid by the Corporation on customer repurchase agreements was 0.10% at June 30, 2015 and December 31, 2014. The carrying value of the underlying securities was $4,860,000 at June 30, 2015 and $5,590,000 at December 31, 2014.

LONG-TERM BORROWINGS

Long-term borrowings are as follows:

(In Thousands)	June 30,	Dec. 31
	2015	2014
FHLB-Pittsburgh borrowings	$11,916	$12,060
Repurchase agreements	51,000	61,000
Total long-term borrowings	$62,916	$73,060

Long-term borrowings from FHLB - Pittsburgh are as follows:

(In Thousands)	June 30,	Dec. 31
	2015	2014
Loan maturing in 2016 with a rate of 6.86%	$83	$107
Loan maturing in 2017 with a rate of 6.83%	13	16
Loan maturing in 2017 with a rate of 3.81%	10,000	10,000
Loan maturing in 2020 with a rate of 4.79%	905	987
Loan maturing in 2025 with a rate of 4.91%	915	950
Total long-term FHLB-Pittsburgh borrowings	$11,916	$12,060

Repurchase agreements included in long-term borrowings are as follows:

(In Thousands)	June 30,	Dec. 31
	2015	2014
Agreement maturing in 2017 with a rate of 3.595%	$27,000	$27,000
Agreement maturing in 2017 with a rate of 4.265%	24,000	34,000
Total long-term repurchase agreements	$51,000	$61,000

The Corporation incurred a loss of $910,000 in the second quarter of 2015 on prepayment of $10,000,000 of the agreement with an interest rate of 4.265%.

“Repurchase Dates,” as defined in the Master Repurchase Agreement between the Corporation and the broker-dealer, occur quarterly on or about the 20^th of each March, June, September and December until the “Final Repurchase Date” (as defined) on December 20, 2017. The Corporation pays interest, and each of the borrowings is putable by the issuer, on each Repurchase Date. The Final Repurchase Date is the effective maturity date of the borrowings.

Securities sold under repurchase agreements were delivered to the broker-dealer who is the counter-party to the transactions. The broker-dealer may have sold, loaned or otherwise disposed of such securities to other parties in the normal course of their operations, and has agreed to resell to the Corporation substantially identical securities at the maturities of the agreements. The Master Repurchase Agreement provides that the Agreement constitutes a “netting contract,” as defined; however, the Corporation and the broker-dealer have no other obligations to one another and accordingly, no netting has occurred.

The carrying value of the underlying securities was $64,212,000 at June 30, 2015 and $70,982,000 at December 31, 2014, detailed in the following table:

(In Thousands)	June 30,		December 31,
	2015		2014
Mortgage-backed securities	$	21,888	$	24,114
Collateralized mortgage obligations, Issued by U.S. Government agencies		42,324		46,868
Total	$	64,212	$	70,982

Two of the more significant risks associated with the repurchase agreements are as follows:

● The borrowings are putable at quarterly intervals by the issuer. Accordingly, if interest rates were to rise to a sufficient level, the issuer would be expected to require the Corporation to pay off the borrowings. In this circumstance, the Corporation would be required to obtain new borrowings at a higher interest rate than the existing repurchase agreements or utilize cash from other sources to pay off the borrowings. If sales of available-for-sale securities were used to generate cash to pay off the borrowings, the value of such securities would be expected to have fallen, which could result in the Corporation recognizing a loss.

● As principal pay-downs of mortgage backed securities and CMOs occur, the Corporation must have available, unencumbered assets or purchase a sufficient amount of assets with credit quality suitable to the broker-dealer to replace the amounts being paid off. Since pre-payments of mortgages typically increase as interest rates fall, the Corporation may be required to purchase additional assets at times when market rates are lower than the rates paid on the borrowings.

The Corporation manages these risks by maintaining sufficient available assets of acceptable credit quality, as well as maintaining other borrowing facilities, to meet ongoing collateral maintenance requirements or pay off the borrowings if required. In particular, the Corporation had unused borrowing capacity available from the FHLB-Pittsburgh of $292,963,000 at June 30, 2015.