Loans and Leases | NOTE 4 – LOANS AND LEASES The following tables present the activity in the allowance for loan and lease losses by portfolio segment for the periods ending June 30, 2016 and 2015 (in thousands). Commercial Commercial and multi-family real estate Residential 1 – 4 family real estate Consumer Total Balance at December 31, 2015 $ 893 $ 2,540 $ 373 $ 28 $ 3,834 Provision (credit) charged to expenses 106 (809) 7 (4) (700) Losses charged off - (11) (24) (8) (43) Recoveries 18 251 0 8 277 Balance at June 30, 2016 $ 1,017 $ 1,971 $ 356 $ 24 $ 3,368 Commercial Commercial and multi-family real estate Residential 1 – 4 family real estate Consumer Total Balance at December 31, 2014 $ 198 $ 3,255 $ 363 $ 24 $ 3,840 Provision (credit) charged to expenses 246 (183) 37 - 100 Losses charged off (327) (126) (108) (11) (572) Recoveries 60 77 19 2 158 Balance at June 30, 2015 $ 177 $ 3,023 $ 311 $ 15 $ 3,526 The following tables present the balance in the allowance for loan and lease losses and the recorded investment in loans and leases by portfolio segment and based on impairment method for the periods ending June 30, 2016 and December 31, 2015 (in thousands): June 30, 2016 Commercial Commercial and multi-family real estate Residential 1 – 4 family real estate Consumer Total Allowance for loan and lease losses: Attributable to loans and leases individually evaluated for impairment $ 614 $ 711 $ - $ - $ 1,325 Collectively evaluated for impairment 403 1,260 356 24 2,043 Total allowance for loan and lease losses $ 1,017 $ 1,971 $ 356 $ 24 $ 3,368 Loans and leases: Individually evaluated for impairment $ 1,593 $ 2,088 $ - $ - $ 3,681 Acquired with deteriorated credit quality - 627 55 - 682 Collectively evaluated for impairment 67,586 204,732 79,280 3,812 355,410 Total ending loans and leases balance $ 69,179 $ 207,447 $ 79,335 $ 3,812 $ 359,773 December 31, 2015 Commercial Commercial and multi-family real estate Residential 1 – 4 family real estate Consumer Total Allowance for loan and lease losses: Attributable to loans and leases individually evaluated for impairment $ 528 $ 842 $ - $ - $ 1,370 Collectively evaluated for impairment 365 1,698 373 28 2,464 Total allowance for loan and lease losses $ 893 $ 2,540 $ 373 $ 28 $ 3,834 Loans and leases: Individually evaluated for impairment $ 2,192 $ 3,820 $ - $ - $ 6,012 Acquired with deteriorated credit quality 43 669 74 - 786 Collectively evaluated for impairment 64,092 201,481 78,022 3,857 347,452 Total ending loans and leases balance $ 66,327 $ 205,970 $ 78,096 $ 3,857 $ 354,250 Impaired loans and leases were as follows as of June 30, 2016 and December 31, 2015: (in thousands) June 30, 2016 December 31, 2015 Loans and leases with no allowance for loan and lease losses allocated $ - $ - Loans and leases with allowance for loan and lease losses allocated 3,681 6,012 Total impaired loans and leases 3,681 6,012 Amount of the allowance allocated to impaired loans and leases $ 1,325 $ 1,370 No Additional funds are committed to be advanced in connection with impaired loans and leases. The average recorded investment in impaired loans and leases (excluding loans and leases acquired with deteriorated credit quality) for the six month periods ended June 30, 201 6 and 201 5 was approximately $ 4.2 million and $5.2 million, respectively. There was approximately $182,000 and $138,000 in interest income recognized by the Corporation on impaired loans and leases on an accrual or cash basis for the six month periods ended June 30 , 201 6 and 201 5 , respectively. The following table presents loans and leases individually evaluated for impairment by class of loans as of June 30, 2016 and December 31, 2015: (in thousands) June 30, 2016 December 31, 2015 Recorded investment Allowance for loan and lease losses allocated Recorded investment Allowance for loan and lease losses allocated With no related allowance recorded: Commercial $ - $ - $ - $ - Commercial and multi-family real estate - - - - Agriculture - - - - Agricultural real estate - - - - Consumer - - - - Residential 1-4 family real estate - - - - With an allowance recorded: Commercial 1,593 614 2,192 528 Commercial and multi-family real estate 2,088 711 3,820 842 Agriculture - - - - Agricultural real estate - - - - Consumer - - - - Residential 1-4 family real estate - - - - Total $ 3,681 $ 1,325 $ 6,012 $ 1,370 The following tables present the recorded investment in nonaccrual loans and leases, loans and leases past due over 90 days still on accrual and troubled debt restructurings by class of loans as of June 30, 2016 and December 31, 2015: (in thousands) June 30, 2016 Nonaccrual Loans and leases past due over 90 days still accruing Troubled Debt Restructurings Commercial $ 1,732 $ - $ 62 Commercial real estate 3,596 - 722 Agricultural real estate 40 - - Agriculture - - - Consumer 5 - - Residential: 1 – 4 family 1,211 - 391 Home equity - - - Total $ 6,584 $ - $ 1,175 December 31, 2015 Nonaccrual Loans and leases past due over 90 days still accruing Troubled Debt Restructurings Commercial $ 355 $ - $ - Commercial real estate 4,113 - 1,403 Agricultural real estate 52 260 - Agriculture 19 - - Consumer 12 - - Residential: 1 – 4 family 1,394 - 393 Home equity - - - Total $ 5,945 $ 260 $ 1,796 The nonaccrual balances in the table above include troubled debt restructurings that have been classified as nonaccrual. The following table presents the aging of the recorded investment in past due loans and leases as of June 30, 2016 by class of loans and leases (in thousands): 30 – 59 days past due 60 – 89 days past due Greater than 90 days past due Total past due Loans and leases not past due Total Commercial $ 22 $ - $ 81 $ 103 $ 57,420 $ 57,523 Commercial real estate 118 49 407 574 183,567 184,141 Agriculture - - - - 11,656 11,656 Agricultural real estate 6 266 - 272 23,034 23,306 Consumer 25 - - 25 3,787 3,812 Residential real estate 1,854 213 267 2,334 77,001 79,335 Total $ 2,025 $ 528 $ 755 $ 3,308 $ 356,465 $ 359,773 The following table presents the aging of the recorded investment in past due loans and leases as of December 31, 2015 by class of loans and leases: (in thousands) 30 – 59 days past due 60 – 89 days past due Greater than 90 days past due Total past due Loans and leases not past due Total Commercial $ 81 $ 50 $ 121 $ 252 $ 53,210 $ 53,462 Commercial real estate 644 16 1,225 1,885 181,952 183,837 Agriculture 150 - 19 169 12,696 12,865 Agricultural real estate 94 - 260 354 21,779 22,133 Consumer 49 - 5 54 3,803 3,857 Residential real estate 2,147 244 389 2,780 75,316 78,096 Total $ 3,165 $ 310 $ 2,019 $ 5,494 $ 348,756 $ 354,250 Credit Quality Indicators: The Corporation categorizes loans and leases into risk categories based on relevant information about the ability of borrowers to service their debt such as: current final financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans and leases individually by classifying the loans and leases as to the credit risk. This analysis generally includes loans and leases with an outs tanding balance greater than $50 0,000 and non-homogenous loans and leases , such as commercial and commercial real estate loans and leases . This analysis is performed on a quarterly basis. The Corporation uses the following definitions for risk ratings: · Special Mention: Loans and leases which possess some credit deficiency or potential weakness which deserve s close attention, but which do not yet warrant substandard classification. Such loans and leases pose unwarranted financial risk that, if not corrected, could weaken the loan and lease and increase risk in the future. The key distinctions of a Special Mention classification are that (1) it is indicative of an unwarranted level of risk, and (2) weaknesses are considered "potential", versus "defined", impairments to the primary source of loan repayment. · Substandard: These loans and leases are inadequately protected by the current sound net worth and paying ability of the borrower. Loans and leases of this type will generally display negative financial trends such as poor or negative net worth, earnings or cash flow. These loans and leases may also have historic and/or severe delinquency problems, and Corporation management may depend on secondary repayment sources to liquidate these loans and leases . The Corporation could sustain some degree of loss in these loans if the weaknesses remain uncorrected. · Doubtful: Loans and leases in this category display a high degree of loss, although the amount of actual loss at the time of classification is undeterminable. This should be a temporary category until such time that actual loss can be identified, or improvements made to reduce the seriousness of the classification. Loans and leases not meeting the previous criteria that are analyzed individually as part of the above described process are considered to be pass rated loans and leases . Loans and leases listed as not rated are generally either less than $500,000 or are included in groups of homogenous loans and leases . As of June 30, 2016 and December 31, 2015, and based on the most recent analysis performed, the risk category of loans by class of loans and leases is as follows (in thousands): June 30, 2016 Pass Special Mention Substandard Doubtful Not rated Commercial $ 45,295 $ - $ 4,492 $ - $ 19,392 Commercial and multi- family real estate 148,621 4,450 4,007 - 50,369 Residential 1 - 4 family 216 - - - 79,119 Consumer - - - - 3,812 Total $ 194,132 $ 4,450 $ 8,499 $ - $ 152,692 December 31, 2015 Pass Special Mention Substandard Doubtful Not rated Commercial $ 41,184 $ 2,806 $ 2,656 $ - $ 19,681 Commercial and multi- family real estate 139,351 7,563 5,976 - 53,080 Residential 1 - 4 family 223 - - - 77,873 Consumer - - - - 3,857 Total $ 180,758 $ 10,369 $ 8,632 $ - $ 154,491 The Corporation considers the performance of the loan and lease portfolio and its impact on the allowance for loan and lease losses. For all loan classes that are not rated, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. Generally, all loans and leases not rated that are 90 days past due or are classified as nonaccrual and collectively evaluated for impairment, are considered nonperforming. The following table presents the recorded investment in all loans and leases that are not risk rated, based on payment activity as of June 30, 2016 and December 31, 2015 (in thousands): : June 30, 2016 Commercial Commercial and multi-family real estate Residential 1-4 family Consumer Performing $ 19,311 $ 49,963 $ 78,852 $ 3,812 Nonperforming 81 406 267 - Total $ 19,392 $ 50,369 $ 79,119 $ 3,812 December 31, 2015 Commercial Commercial and multi-family real estate Residential 1-4 family Consumer Performing $ 19,541 $ 52,248 $ 77,484 $ 3,852 Nonperforming 140 832 389 5 Total $ 19,681 $ 53,080 $ 77,873 $ 3,857 Modifications: The Corporation’s loan and lease portfolio also includes certain loans and leases that have been modified in a Troubled Debt Restructuring (TDR), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Corporation’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. All TDRs are also classified as impaired loans and leases . When the Corporation modifies a loan or lease, management evaluates any possible concession based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, except with the sole (remaining) source of repayment for the loan or lease is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If management determines that the value of the modified loan or lease is less than the recorded investment in the loan or lease (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), an impairment is recognized through a specific reserve in the allowance or a direct write down of the loan or lease balance if collection is not expected. The following table includes the recorded investment and number of modifications for TDR loans and leases during the six month period ended June 30, 2016 (in thousands): Number of modifications Recorded investment Allowance for loan and lease losses allocated Troubled Debt Restructurings: Commercial 1 $ 62 $ - Commercial Real Estate 3 244 - Total 4 $ 306 $ - The concessions granted in the above TDR’s were a modification of the original term. The terms were extended on two of the notes. Two notes were re-amortized with a balloon payment at the end of the terms. The recorded investment in the loans did not change as a result of the modification. There are not any troubled debt restructurings for which there was a payment default in the current reporting period. The following is additional information with respect to loans and leases acquired through The Ohio State Bank acquisition (in thousands): Contractual Principal Accretable Carrying Receivable Difference Amount Purchased Performing Loans and Leases Balance at December 31, 2015 $ 41,874 $ (1,809) $ 40,065 Change due to payments received (3,863) 180 (3,683) Transfer to foreclosed real estate - - - Change due to loan charge-off - - - Balance at June 30, 2016 $ 38,011 $ (1,629) $ 36,382 Contractual Non Principal Accretable Carrying Receivable Difference Amount Purchased Impaired Loans and Leases Balance at December 31, 2015 $ 1,959 $ (1,194) $ 765 Change due to payments received (73) 6 (67) Transfer to foreclosed real estate - - - Change due to loan charge-off (136) 120 (16) Balance at June 30, 2016 $ 1,750 $ (1,068) $ 682 As a result of The Ohio State Bank acquisition, the Corporation has loans, for which there was at acquisition, evidence of deterioration of credit quality since origination and for which it was probable at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans as of June 30 , 201 6 and December 31, 201 5 was $682,000 and $765,000, respectively. No provision for loan and lease losses was recognized during the period ended June 30, 2016 and December 31, 201 5 related to the acquired loans as there was no significant change to the credit quality of the loans. |