Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | 7. LOANS The loans receivable portfolio is segmented into residential mortgage, commercial and consumer loans. Loans outstanding at September 30, 2015 and December 31, 2014 are summarized by segment, and by classes within each segment, as follows: Summary of Loans by Type (In Thousands) Sept. 30, Dec. 31, 2015 2014 Residential mortgage: Residential mortgage loans - first liens $ 298,096 $ 291,882 Residential mortgage loans - junior liens 20,601 21,166 Home equity lines of credit 38,585 36,629 1-4 Family residential construction 23,633 16,739 Total residential mortgage 380,915 366,416 Commercial: Commercial loans secured by real estate 135,760 145,878 Commercial and industrial 72,011 50,157 Political subdivisions 40,186 17,534 Commercial construction and land 6,852 6,938 Loans secured by farmland 7,521 7,916 Multi-family (5 or more) residential 9,181 8,917 Agricultural loans 4,588 3,221 Other commercial loans 12,691 13,334 Total commercial 288,790 253,895 Consumer 10,160 10,234 Total 679,865 630,545 Less: allowance for loan losses (7,416 ) (7,336 ) Loans, net $ 672,449 $ 623,209 The Corporation grants loans to individuals as well as commercial and tax-exempt entities. Commercial, residential and personal loans are made to customers geographically concentrated in the Pennsylvania and New York counties that comprise the market serviced by Citizens & Northern Bank. Although the Corporation has a diversified loan portfolio, a significant portion of its debtors’ ability to honor their contracts is dependent on the local economic conditions within the region. There is no concentration of loans to borrowers engaged in similar businesses or activities that exceed 10% of total loans at either September 30, 2015 or December 31, 2014. The Corporation maintains an allowance for loan losses that represents management’s estimate of the losses inherent in the loan portfolio as of the balance sheet date and recorded as a reduction of the investment in loans. The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Corporation’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. In the process of evaluating the loan portfolio, management also considers the Corporation’s exposure to losses from unfunded loan commitments. As of September 30, 2015 and December 31, 2014, management determined that no allowance for credit losses related to unfunded loan commitments was required. Transactions within the allowance for loan losses, summarized by segment and class, for the three-month and nine-month periods ended September 30, 2015 and 2014 were as follows: Three Months Ended September 30, 2015 June 30, Sept. 30, (In Thousands) 2015 Provision 2015 Balance Charge-offs Recoveries (Credit) Balance Allowance for Loan Losses: Residential mortgage: Residential mortgage loans - first liens $ 2,775 $ (12 ) $ 0 $ (112 ) $ 2,651 Residential mortgage loans - junior liens 210 (42 ) 0 45 213 Home equity lines of credit 344 0 0 (5 ) 339 1-4 Family residential construction 257 0 0 55 312 Total residential mortgage 3,586 (54 ) 0 (17 ) 3,515 Commercial: Commercial loans secured by real estate 1,692 0 0 39 1,731 Commercial and industrial 800 0 1 127 928 Political subdivisions 0 0 0 0 0 Commercial construction and land 296 (115 ) 0 (74 ) 107 Loans secured by farmland 155 0 0 (45 ) 110 Multi-family (5 or more) residential 80 0 0 231 311 Agricultural loans 40 0 0 3 43 Other commercial loans 120 0 0 1 121 Total commercial 3,183 (115 ) 1 282 3,351 Consumer 135 (28 ) 10 6 123 Unallocated 396 0 0 31 427 Total Allowance for Loan Losses $ 7,300 $ (197 ) $ 11 $ 302 $ 7,416 Three Months Ended September 30, 2014 June 30, Sept. 30, (In Thousands) 2014 Provision 2014 Balance Charge-offs Recoveries (Credit) Balance Allowance for Loan Losses: Residential mortgage: Residential mortgage loans - first liens $ 2,966 $ (37 ) $ 12 $ 18 $ 2,959 Residential mortgage loans - junior liens 280 0 0 (5 ) 275 Home equity lines of credit 277 0 0 11 288 1-4 Family residential construction 173 0 0 38 211 Total residential mortgage 3,696 (37 ) 12 62 3,733 Commercial: Commercial loans secured by real estate 1,896 0 0 (60 ) 1,836 Commercial and industrial 626 0 1 40 667 Political subdivisions 0 0 0 0 0 Commercial construction and land 163 0 0 145 308 Loans secured by farmland 96 0 0 58 154 Multi-family (5 or more) residential 103 0 0 (17 ) 86 Agricultural loans 30 0 0 1 31 Other commercial loans 135 0 0 (6 ) 129 Total commercial 3,049 0 1 161 3,211 Consumer 127 (24 ) 12 (5 ) 110 Unallocated 395 0 0 0 395 Total Allowance for Loan Losses $ 7,267 $ (61 ) $ 25 $ 218 7,449 Nine Months Ended September 30, 2015 Dec. 31, Sept. 30, (In Thousands) 2014 2015 Balance Charge-offs Recoveries Provision (Credit) Balance Allowance for Loan Losses: Residential mortgage: Residential mortgage loans - first liens $ 2,941 $ (149 ) $ 1 $ (142 ) $ 2,651 Residential mortgage loans - junior liens 176 (42 ) 0 79 213 Home equity lines of credit 322 0 0 17 339 1-4 Family residential construction 214 0 0 98 312 Total residential mortgage 3,653 (191 ) 1 52 3,515 Commercial: Commercial loans secured by real estate 1,758 (115 ) 0 88 1,731 Commercial and industrial 688 (10 ) 5 245 928 Political subdivisions 0 0 0 0 0 Commercial construction and land 283 (115 ) 0 (61 ) 107 Loans secured by farmland 165 0 0 (55 ) 110 Multi-family (5 or more) residential 87 0 0 224 311 Agricultural loans 31 0 0 12 43 Other commercial loans 131 0 0 (10 ) 121 Total commercial 3,143 (240 ) 5 443 3,351 Consumer 145 (65 ) 44 (1 ) 123 Unallocated 395 0 0 32 427 Total Allowance for Loan Losses $ 7,336 $ (496 ) $ 50 $ 526 $ 7,416 Nine Months Ended September 30, 2014 Dec. 31, Sept. 30, (In Thousands) 2013 Provision 2014 Balance Charge-offs Recoveries (Credit) Balance Allowance for Loan Losses: Residential mortgage: Residential mortgage loans - first liens $ 2,974 $ (96 ) $ 13 $ 68 $ 2,959 Residential mortgage loans - junior liens 294 0 0 (19 ) $ 275 Home equity lines of credit 269 0 0 19 $ 288 1-4 Family residential construction 168 0 0 43 $ 211 Total residential mortgage 3,705 (96 ) 13 111 3,733 Commercial: Commercial loans secured by real estate 3,123 (1,521 ) 250 (16 ) 1,836 Commercial and industrial 591 (24 ) 9 91 667 Political subdivisions 0 0 0 0 0 Commercial construction and land 267 (170 ) 5 206 308 Loans secured by farmland 115 0 0 39 154 Multi-family (5 or more) residential 103 0 0 (17 ) 86 Agricultural loans 30 0 0 1 31 Other commercial loans 138 0 0 (9 ) 129 Total commercial 4,367 (1,715 ) 264 295 3,211 Consumer 193 (70 ) 37 (50 ) 110 Unallocated 398 0 0 (3 ) 395 Total Allowance for Loan Losses $ 8,663 $ (1,881 ) $ 314 $ 353 $ 7,449 In the evaluation of the loan portfolio, management determines two major components for the allowance for loan losses – (1) a specific component based on an assessment of certain larger relationships, mainly commercial purpose loans, on a loan-by-loan basis; and (2) a general component for the remainder of the portfolio based on a collective evaluation of pools of loans with similar risk characteristics. The general component is assigned to each pool of loans based on both historical net charge-off experience, and an evaluation of certain qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the above methodologies for estimating specific and general losses in the portfolio. In determining the larger loan relationships for detailed assessment under the specific allowance component, the Corporation uses an internal risk rating system. Under the risk rating system, the Corporation classifies problem or potential problem loans as “Special Mention,” “Substandard,” or “Doubtful” on the basis of currently existing facts, conditions and values. Substandard loans include those characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans that do not currently expose the Corporation to sufficient risk to warrant classification as Substandard or Doubtful, but possess weaknesses that deserve management’s close attention, are deemed to be Special Mention. Risk ratings are updated any time that conditions or the situation warrants. Loans not classified are included in the “Pass” column in the table below. The following tables summarize the aggregate credit quality classification of outstanding loans by risk rating as of September 30, 2015 and December 31, 2014: September 30, 2015 (In Thousands) Special Pass Mention Substandard Doubtful Total Residential Mortgage: Residential mortgage loans - first liens $ 289,450 $ 552 $ 8,026 $ 68 $ 298,096 Residential mortgage loans - junior liens 19,985 190 426 0 20,601 Home equity lines of credit 37,978 247 360 0 38,585 1-4 Family residential construction 23,615 18 0 0 23,633 Total residential mortgage 371,028 1,007 8,812 68 380,915 Commercial: Commercial loans secured by real estate 121,759 5,253 8,748 0 135,760 Commercial and Industrial 67,174 4,285 413 139 72,011 Political subdivisions 40,186 0 0 0 40,186 Commercial construction and land 6,651 70 131 0 6,852 Loans secured by farmland 5,570 488 1,442 21 7,521 Multi-family (5 or more) residential 7,927 267 987 0 9,181 Agricultural loans 4,569 0 19 0 4,588 Other commercial loans 12,610 81 0 0 12,691 Total commercial 266,446 10,444 11,740 160 288,790 Consumer 9,987 21 152 0 10,160 Totals $ 647,461 $ 11,472 $ 20,704 $ 228 $ 679,865 December 31, 2014 (In Thousands) Special Pass Mention Substandard Doubtful Total Residential Mortgage: Residential mortgage loans - first liens $ 280,094 $ 1,246 $ 10,464 $ 78 $ 291,882 Residential mortgage loans - junior liens 20,502 112 552 0 21,166 Home equity lines of credit 35,935 294 400 0 36,629 1-4 Family residential construction 16,719 20 0 0 16,739 Total residential mortgage 353,250 1,672 11,416 78 366,416 Commercial: Commercial loans secured by real estate 133,204 2,775 9,899 0 145,878 Commercial and Industrial 41,751 7,246 1,042 118 50,157 Political subdivisions 17,534 0 0 0 17,534 Commercial construction and land 4,650 266 2,022 0 6,938 Loans secured by farmland 5,990 433 1,468 25 7,916 Multi-family (5 or more) residential 8,629 288 0 0 8,917 Agricultural loans 3,196 0 25 0 3,221 Other commercial loans 13,248 86 0 0 13,334 Total commercial 228,202 11,094 14,456 143 253,895 Consumer 10,095 22 117 0 10,234 Totals $ 591,547 $ 12,788 $ 25,989 $ 221 $ 630,545 The general component of the allowance for loan losses covers pools of loans including commercial loans not considered individually impaired, as well as smaller balance homogeneous classes of loans, such as residential real estate, home equity lines of credit and other consumer loans. Accordingly, the Corporation generally does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are subject to a restructuring agreement. The pools of loans are evaluated for loss exposure based upon three-year average historical net charge-off rates for each loan class, adjusted for qualitative factors. Qualitative risk factors (described in the following paragraph) are evaluated for the impact on each of the three segments (residential mortgage, commercial and consumer) within the loan portfolio. Each qualitative factor is assigned a value to reflect improving, stable or declining conditions based on management’s judgment using relevant information available at the time of the evaluation. The adjustment for qualitative factors is applied as an increase or decrease to the three-year average net charge-off rate to each loan class within each segment. The qualitative factors used in the general component calculations are designed to address credit risk characteristics associated with each segment. The Corporation’s credit risk associated with all of the segments is significantly impacted by these factors, which include economic conditions within its market area, the Corporation’s lending policies, changes or trends in the portfolio, risk profile, competition, regulatory requirements and other factors. Further, the residential mortgage segment is significantly affected by the values of residential real estate that provide collateral for the loans. The majority of the Corporation’s commercial segment loans (approximately 55% at September 30, 2015) is secured by real estate, and accordingly, the Corporation’s risk for the commercial segment is significantly affected by commercial real estate values. The consumer segment includes a wide mix of loans for different purposes, primarily secured loans, including loans secured by motor vehicles, manufactured housing and other types of collateral. Loans are classified as impaired, when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial loans, by the fair value of the collateral (if the loan is collateral dependent), by future cash flows discounted at the loan’s effective rate or by the loan’s observable market price. The scope of loans evaluated individually for impairment include all loan relationships greater than $200,000 for which there is at least one extension of credit graded Special Mention, Substandard or Doubtful. Also, all loans classified as troubled debt restructurings (discussed in more detail below) and all loan relationships less than $200,000 in the aggregate, but with an estimated loss of $100,000 or more, are individually evaluated for impairment. Loans that are individually evaluated for impairment, but which are not determined to be impaired, are combined with all remaining loans that are not revie wed on a specific basis, and such loans are included within larger pools of loans based on similar risk and loss characteristics for purposes of determining the general component of the allowance. The loans that have been individually evaluated, but which have not been determined to be impaired, are included in the “Collectively Evaluated” column in the tables summarizing the allowance and associated loan balances as of September 30, 2015 and December 31, 2014. The following tables present a summary of loan balances and the related allowance for loan losses summarized by portfolio segment and class for each impairment method used as of September 30, 2015 and December 31, 2014: September 30, 2015 Loans: Allowance for Loan Losses: (In Thousands) Individually Collectively Individually Collectively Evaluated Evaluated Totals Evaluated Evaluated Totals Residential mortgage: Residential mortgage loans - first liens $ 652 $ 297,444 $ 298,096 $ 4 $ 2,647 $ 2,651 Residential mortgage loans - junior liens 75 20,526 20,601 0 213 213 Home equity lines of credit 0 38,585 38,585 0 339 339 1-4 Family residential construction 0 23,633 23,633 0 312 312 Total residential mortgage 727 380,188 380,915 4 3,511 3,515 Commercial: Commercial loans secured by real estate 6,227 129,533 135,760 98 1,633 1,731 Commercial and industrial 327 71,684 72,011 75 853 928 Political subdivisions 0 40,186 40,186 0 0 0 Commercial construction and land 25 6,827 6,852 0 107 107 Loans secured by farmland 1,463 6,058 7,521 52 58 110 Multi-family (5 or more) residential 987 8,194 9,181 233 78 311 Agricultural loans 19 4,569 4,588 0 43 43 Other commercial loans 0 12,691 12,691 0 121 121 Total commercial 9,048 279,742 288,790 458 2,893 3,351 Consumer 0 10,160 10,160 0 123 123 Unallocated 427 Total $ 9,775 $ 670,090 $ 679,865 $ 462 $ 6,527 $ 7,416 December 31, 2014 Loans: Allowance for Loan Losses: (In Thousands) Individually Collectively Individually Collectively Evaluated Evaluated Totals Evaluated Evaluated Totals Residential mortgage: Residential mortgage loans - first liens $ 1,665 $ 290,217 $ 291,882 $ 358 $ 2,583 $ 2,941 Residential mortgage loans - junior liens 17 21,149 21,166 0 176 176 Home equity lines of credit 0 36,629 36,629 0 322 322 1-4 Family residential construction 0 16,739 16,739 0 214 214 Total residential mortgage 1,682 364,734 366,416 358 3,295 3,653 Commercial: Commercial loans secured by real estate 6,537 139,341 145,878 16 1,742 1,758 Commercial and industrial 663 49,494 50,157 82 606 688 Political subdivisions 0 17,534 17,534 0 0 0 Commercial construction 1,939 4,999 6,938 211 72 283 Loans secured by farmland 1,470 6,446 7,916 102 63 165 Multi-family (5 or more) residential 0 8,917 8,917 0 87 87 Agricultural loans 25 3,196 3,221 0 31 31 Other commercial loans 0 13,334 13,334 0 131 131 Total commercial 10,634 243,261 253,895 411 2,732 3,143 Consumer 0 10,234 10,234 0 145 145 Unallocated 395 Total $ 12,316 $ 618,229 $ 630,545 $ 769 $ 6,172 $ 7,336 Summary information related to impaired loans at September 30, 2015 and December 31, 2014 is as follows: (In Thousands) September 30, 2015 December 31, 2014 Unpaid Unpaid Principal Recorded Related Principal Recorded Related Balance Investment Allowance Balance Investment Allowance With no related allowance recorded: Residential mortgage loans - first liens $ 609 $ 609 $ $ 950 $ 950 $ Residential mortgage loans - junior liens 75 75 17 17 Commercial loans secured by real estate 7,519 5,908 8,062 6,521 Commercial and industrial 252 252 513 513 Commercial construction and land 25 25 124 124 Loans secured by farmland 924 924 925 925 Agricultural loans 19 19 25 25 Total with no related allowance recorded 9,423 7,812 10,616 9,075 With a related allowance recorded: Residential mortgage loans - first liens 43 43 4 715 715 358 Commercial loans secured by real estate 319 319 98 16 16 16 Commercial and industrial 75 75 75 150 150 82 Commercial construction and land 0 0 0 1,815 1,815 211 Loans secured by farmland 539 539 52 545 545 102 Multi-family (5 or more) residential 987 987 233 0 0 0 Total with a related allowance recorded 1,963 1,963 462 3,241 3,241 769 Total $ 11,386 $ 9,775 $ 462 $ 13,857 $ 12,316 $ 769 The average balance of impaired loans and interest income recognized on impaired loans is as follows: Interest Income Recognized on Average Investment in Impaired Loans Impaired Loans on a Cash Basis (In Thousands) 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2015 2014 2015 2014 2015 2014 2015 2014 Residential mortgage: Residential mortgage loans - first lien $ 1,990 $ 4,427 $ 2,534 $ 4,460 $ 9 $ 19 $ 67 $ 65 Residential mortgage loans - junior lien 67 198 62 206 1 0 3 2 Total residential mortgage 2,057 4,625 2,596 4,666 10 19 70 67 Commercial: Commercial loans secured by real estate 6,327 7,131 6,382 7,360 90 78 293 345 Commercial and industrial 421 874 467 930 4 10 16 29 Commercial construction and land 42 407 50 463 0 0 0 4 Loans secured by farmland 1,466 1,530 1,467 1,405 26 23 78 56 Multi-family (5 or more) residential 741 0 741 0 0 0 0 0 Agricultural loans 21 42 22 44 1 0 3 2 Total commercial 9,018 9,984 9,129 10,202 121 111 390 436 Consumer 0 2 0 2 0 0 0 0 Total $ 11,075 $ 14,611 $ 11,725 $ 14,870 $ 131 $ 130 $ 460 $ 503 Loans are placed on nonaccrual status for all classes of loans when, in the opinion of management, collection of interest is doubtful. Any unpaid interest previously accrued on those loans is reversed from income. Interest income is not recognized on specific impaired loans unless the likelihood of further loss is remote. Interest payments received on loans for which the risk of further loss is greater than remote are applied as a reduction of the loan principal balance. Interest income on other nonaccrual loans, including impaired loans, is recognized only to the extent of interest payments received. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments. Also, the amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status. The breakdown by portfolio segment and class of nonaccrual loans and loans past due ninety days or more and still accruing is as follows: (In Thousands) September 30, 2015 December 31, 2014 Past Due Past Due 90+ Days and 90+ Days and Accruing Nonaccrual Accruing Nonaccrual Residential mortgage: Residential mortgage loans - first liens $ 2,021 $ 3,074 $ 1,989 $ 3,440 Residential mortgage loans - junior liens 100 8 82 50 Home equity lines of credit 48 19 49 22 Total residential mortgage 2,169 3,101 2,120 3,512 Commercial: Commercial loans secured by real estate 628 5,712 653 5,804 Commercial and industrial 0 327 5 379 Commercial construction and land 0 25 35 1,915 Loans secured by farmland 0 1,438 0 951 Multi-family (5 or more) residential 0 987 0 0 Agricultural loans 0 19 0 25 Total commercial 628 8,508 693 9,074 Consumer 36 23 30 24 Totals $ 2,833 $ 11,632 $ 2,843 $ 12,610 The amounts shown in the table immediately above include loans classified as troubled debt restructurings (described in more detail below), if such loans are past due ninety days or more or nonaccrual. The table below presents a summary of the contractual aging of loans as of September 30, 2015 and December 31, 2014: As of September 30, 2015 As of December 31, 2014 Current & Current & (In Thousands) Past Due Past Due Past Due Past Due Past Due Past Due Less than 30-89 90+ Less than 30-89 90+ 30 Days Days Days Total 30 Days Days Days Total Residential mortgage: Residential mortgage loans - first liens $ 290,371 $ 4,241 $ 3,484 $ 298,096 $ 282,766 $ 5,443 $ 3,673 $ 291,882 Residential mortgage loans - junior liens 20,290 211 100 20,601 20,853 190 123 21,166 Home equity lines of credit 38,243 294 48 38,585 36,300 258 71 36,629 1-4 Family residential construction 23,633 0 0 23,633 16,739 0 0 16,739 Total residential mortgage 372,537 4,746 3,632 380,915 356,658 5,891 3,867 366,416 Commercial: Commercial loans secured by real estate 134,453 18 1,289 135,760 143,713 883 1,282 145,878 Commercial and industrial 71,948 42 21 72,011 49,994 43 120 50,157 Political subdivisions 40,186 0 0 40,186 17,534 0 0 17,534 Commercial construction and land 6,827 0 25 6,852 4,897 91 1,950 6,938 Loans secured by farmland 6,688 0 833 7,521 6,811 254 851 7,916 Multi-family (5 or more) residential 8,019 175 987 9,181 8,720 197 0 8,917 Agricultural loans 4,447 122 19 4,588 3,105 91 25 3,221 Other commercial loans 12,691 0 0 12,691 13,334 0 0 13,334 Total commercial 285,259 357 3,174 288,790 248,108 1,559 4,228 253,895 Consumer 10,060 64 36 10,160 10,164 40 30 10,234 Totals $ 667,856 $ 5,167 $ 6,842 $ 679,865 $ 614,930 $ 7,490 $ 8,125 $ 630,545 Nonaccrual loans are included in the contractual aging in the immediately preceding table. A summary of the contractual aging of nonaccrual loans at September 30, 2015 and December 31, 2014 is as follows: Current & (In Thousands) Past Due Past Due Past Due Less than 30-89 90+ 30 Days Days Days Total September 30, 2015 Nonaccrual Totals $ 7,236 $ 387 $ 4,009 $ 11,632 December 31, 2014 Nonaccrual Totals $ 6,959 $ 369 $ 5,282 $ 12,610 Loans whose terms are modified are classified as Troubled Debt Restructurings (TDRs) if the Corporation grants such borrowers concessions, and it is deemed that those borrowers are experiencing financial difficulty. Loans classified as TDRs are designated as impaired. The outstanding balance of loans subject to TDRs, as well as contractual aging information at September 30, 2015 and December 31, 2014 is as follows: Current & (In Thousands) Past Due Past Due Past Due Less than 30-89 90+ 30 Days Days Days Nonaccrual Total September 30, 2015 Totals $ 962 $ 81 $ 0 $ 5,182 $ 6,225 December 31, 2014 Totals $ 1,725 $ 82 $ 0 $ 5,388 $ 7,195 There were no TDRs that occurred during the three-month periods ended September 30, 2015 and 2014. TDRs that occurred during the nine-month periods ended September 30, 2015 and 2014 were as follows: Nine Months Ended September 30, 2015 Pre- Post- (Balances in Thousands) Modification Modification Number Outstanding Outstanding of Recorded Recorded Contracts Investment Investment Residential mortgage: Residential mortgage loans - first liens 1 $ 56 $ 56 Residential mortgage loans - junior liens 1 32 32 Consumer 1 30 30 Nine Months Ended September 30, 2014 Pre- Post- Modification Modification Number Outstanding Outstanding of Recorded Recorded Contracts Investment Investment Residential mortgage: Residential mortgage loans - first liens 3 $ 150 $ 150 Commercial: 5 6,679 5,193 Commercial and industrial 1 80 80 The TDRs in the nine-month period ended September 30, 2015 included an extended maturity date and a reduction in interest rate on a residential mortgage – first lien, a lowered interest rate and reduced payment amount on a residential mortgage – junior lien loan and a lowered interest rate and reduced payment amount on the consumer loan. There was no allowance for loan losses on these loans at September 30, 2015, and no change in the allowance for loan losses resulting from these TDRs. The TDRs related to residential mortgage loans in the nine-month period ended September 30, 2014 included a reduction in payment amount on one contract, an interest only period allowed on one contract and a reduction in interest rate and payment on one contract. The TDRs related to the commercial loans in the nine-month period ended September 30, 2014 relate to six contracts associated with one relationship. The Corporation entered into a forbearance agreement with this commercial borrower which includes a reduction in monthly payment amounts over a fifteen-month period. At the end of the fifteen-month period, the monthly payment amounts would revert to the original amounts, unless the forbearance agreement is extended or the payment requirements are otherwise modified. In July 2015, the forbearance agreement was extended for twelve months. The Corporation recorded a charge-off of $1,486,000 in the second quarter 2014 as a result of these modifications, as the payment amounts based on the forbearance agreement are not sufficient to fully amortize the contractual amount of principal outstanding on the loans. The amount of charge-off was determined based on the excess of the contractual principal due over the present value of the payment amounts provided for in the forbearance agreement, assuming the revised payment amounts would continue until maturity, at the contractual interest rates. After the effect of the charge-off, the total recorded investment in loans to this borrower amounted to $5,273,000, with no related allowance for loan losses on these loans at September 30, 2014, while the allowance on the loans amounted to $1,552,000 at December 31, 2013. There were no changes in the allowance for loan losses related to TDRs that occurred in the third quarter 2014. In the three-month period ended September 30, 2015, defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months were as follows: Number of Recorded Contracts Investment Three Months Ended September 30, 2015 (Balances in Thousands) Residential mortgage: Residential mortgage loans - first liens 1 $ 32 In the third quarter 2015, the event of default in the table listed above resulted from a borrower’s failure to make regular payments after reduced payment amount period of six months ended on a first lien residential mortgage. There was no allowance for loan losses recorded on this loan at September 30, 2015. In the third quarter 2014, there were no defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months. In the nine-month periods ended September 30, 2015 and 2014, defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months were as follows: Number of Recorded Contracts Investment Nine Months Ended September 30, 2015 (Balances in Thousands) Residential mortgage, Residential mortgage loans - first liens 2 $ 65 Commercial, Commercial construction and land 1 25 Number of Recorded Contracts Investment Nine Months Ended September 30, 2014 (Balances in Thousands) Residential mortgage: 2 $ 223 Residential mortgage loans - junior liens 1 62 Commercial: Commercial loans secured by real estate 1 429 Loans secured by farmland 4 490 Agricultural 1 13 In the nine-month period ended September 30, 2015, the events of default in the table listed above resulted from the borrowers’ failure to make timely payments under the following circumstances: (1) for one customer relationship included in the Residential first lien mortgage class, payment was missed after reduced payment amount for a period of six months; (2) for a second customer relationship included in the Residential first lien mortgage class, payment was missed after reduction to interest only payment requirements for a period of a year; and (3) for the Commercial construction and land loan, monthly payments were missed after extending the term of maturity. There were no allowances for loan losses recorded on these loans at September 30, 2015. In the nine-month period ended September 30, 2014, the events of default in the table listed above included a borrower’s failure to make reduced payments provided for at a reduced interest rate on a first lien residential mortgage. The other events of default listed above in the nine-month period ended September 30, 2014 resulted from the borrowers’ failure to make interest only monthly payments. There were no allowances for loan losses recorded on these loans at September 30, 2014. At September 30, 2015, the carrying amount of foreclosed residential real estate properties held as a result of obtaining physical possession (included in Foreclosed assets held for sale in the unaudited consolidated balance sheet) was $654,000. At September 30, 2015, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $1,485,000. |