Loans | 9 Months Ended |
Sep. 30, 2014 |
Receivables [Abstract] | ' |
Loans | ' |
5 | LOANS | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Total net loans at September 30, 2014 and December 31, 2013 are summarized as follows: |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, | | | December 31, | | | | | | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | | | | | |
Commercial, industrial, and agricultural | | $ | 424,059 | | | $ | 427,715 | | | | | | | | | | | | | | | | | | | | | |
Commercial mortgages | | | 338,445 | | | | 343,465 | | | | | | | | | | | | | | | | | | | | | |
Residential real estate | | | 494,799 | | | | 459,114 | | | | | | | | | | | | | | | | | | | | | |
Consumer | | | 67,753 | | | | 63,491 | | | | | | | | | | | | | | | | | | | | | |
Credit cards | | | 5,079 | | | | 5,065 | | | | | | | | | | | | | | | | | | | | | |
Overdrafts | | | 445 | | | | 409 | | | | | | | | | | | | | | | | | | | | | |
Less: unearned discount | | | (4,205 | ) | | | (3,896 | ) | | | | | | | | | | | | | | | | | | | | |
allowance for loan losses | | | (17,843 | ) | | | (16,234 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans, net | | $ | 1,308,532 | | | $ | 1,279,129 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
At September 30, 2014 and December 31, 2013, net unamortized loan costs of $657 and $911, respectively, have been included in the carrying value of loans. |
|
The Corporation’s outstanding loans and related unfunded commitments are primarily concentrated within Central and Western Pennsylvania and Central Ohio. The Bank attempts to limit concentrations within specific industries by utilizing dollar limitations to single industries or customers, and by entering into participation agreements with third parties. Collateral requirements are established based on management’s assessment of the customer. The Corporation maintains lending policies to control the quality of the loan portfolio. These policies delegate the authority to extend loans under specific guidelines and underwriting standards. These policies are prepared by the Corporation’s management and reviewed and ratified annually by the Corporation’s Board of Directors. |
|
All relevant documentation, such as the loan application, financial statements and tax returns, required under the lending policies is summarized and provided to management and/or the Corporation’s Board of Directors in connection with the loan approval process. Such documentation is subsequently electronically archived in the Corporation’s document management system. Pursuant to the Corporation’s lending policies, management considers a variety of factors when determining whether to extend credit to a customer, including loan-to-value ratios, FICO scores, quality of the borrower’s financial statements, and the ability to obtain personal guarantees. |
|
Commercial, industrial, and agricultural loans comprised 32% of the Corporation’s total loan portfolio at September 30, 2014 and 33% as of December 31, 2013. Commercial mortgage loans comprised 26% of the Corporation’s total loan portfolio at September 30, 2014 and 27% as of December 31, 2013. Management assigns a risk rating to all commercial loans. The loan-to-value policy guidelines for commercial, industrial, and agricultural loans are generally a maximum of 80% of the value of business equipment, a maximum of 75% of the value of accounts receivable, and a maximum of 60% of the value of business inventory. The loan-to-value policy guideline for commercial mortgage loans is generally a maximum of 85% of the appraised value of the real estate. |
|
Residential real estate loans comprised 38% and 36% of the Corporation’s total loan portfolio at September 30, 2014 and December 31, 2013, respectively. The loan-to-value policy guidelines for residential real estate loans vary depending on the collateral position and the specific type of loan. Higher loan-to-value terms may be approved with the appropriate private mortgage insurance coverage. The Corporation also originates and prices loans for sale into the secondary market through Freddie Mac. Loans so originated are classified as loans held for sale and are excluded from residential real estate loans reported above. Loans held for sale as of September 30, 2014 totaled $1.3 million. The rationale for these sales is to mitigate interest rate risk associated with holding lower rate, long-term residential mortgages in the loan portfolio and to generate fee revenue from sales and servicing the loan. The Corporation also offers a variety of unsecured and secured consumer loan and credit card products which represent less than 10% of the total loan portfolio at both September 30, 2014 and December 31, 2013. Terms and collateral requirements vary depending on the size and nature of the loan. |
|
|
|
The Corporation has not underwritten any hybrid loans, payment option loans, or low documentation/no documentation loans. Variable rate loans are generally underwritten at the fully indexed rate. Loan underwriting policies and procedures have not changed materially between any periods presented. |
|
During the first quarter of 2014, management reviewed its loan portfolio segments resulting in the reclassification of approximately $66 million into Commercial, Industrial and Agricultural. $54 million was reclassified out of Commercial Mortgages and $12 million was reclassified out of Residential Real Estate. During the second quarter of 2014, management further identified a reclassification of approximately $70 million into the Commercial, Industrial and Agricultural segment from the Commercial Mortgage segment. Accordingly, the December 31, 2013 loan portfolio segment balances were reclassified to conform to the September 30, 2014 presentation. The effect of this reclassification was not considered material to the overall allowance for loan losses, did not change the total loan balances, and is not considered material to the consolidated financial statements taken as a whole. |
|
Transactions in the allowance for loan losses for the three months ended September 30, 2014 were as follows: |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial, | | | | | | Residential | | | | | | | | | | | | | |
| | Industrial, and | | | Commercial | | | Real | | | | | | Credit | | | | | | | |
| | Agricultural | | | Mortgages | | | Estate | | | Consumer | | | Cards | | | Overdrafts | | | Total | |
Allowance for loan losses, July 1, 2014 | | $ | 8,096 | | | $ | 4,581 | | | $ | 2,467 | | | $ | 1,996 | | | $ | 88 | | | $ | 187 | | | $ | 17,415 | |
Charge-offs | | | (60 | ) | | | (92 | ) | | | (17 | ) | | | (415 | ) | | | (16 | ) | | | (75 | ) | | | (675 | ) |
Recoveries | | | 0 | | | | 0 | | | | 18 | | | | 25 | | | | 4 | | | | 18 | | | | 65 | |
Provision for loan losses | | | 690 | | | | (291 | ) | | | 93 | | | | 467 | | | | 3 | | | | 76 | | | | 1,038 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses, September 30, 2014 | | $ | 8,726 | | | $ | 4,198 | | | $ | 2,561 | | | $ | 2,073 | | | $ | 79 | | | $ | 206 | | | $ | 17,843 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Transactions in the allowance for loan losses for the nine months ended September 30, 2014 were as follows: |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial, | | | | | | Residential | | | | | | | | | | | | | |
| | Industrial, and | | | Commercial | | | Real | | | | | | Credit | | | | | | | |
| | Agricultural | | | Mortgages | | | Estate | | | Consumer | | | Cards | | | Overdrafts | | | Total | |
Allowance for loan losses, January 1, 2014 | | $ | 8,212 | | | $ | 3,536 | | | $ | 2,450 | | | $ | 1,763 | | | $ | 66 | | | $ | 207 | | | $ | 16,234 | |
Charge-offs | | | (379 | ) | | | (142 | ) | | | (215 | ) | | | (1,183 | ) | | | (39 | ) | | | (197 | ) | | | (2,155 | ) |
Recoveries | | | 1 | | | | 10 | | | | 37 | | | | 78 | | | | 7 | | | | 73 | | | | 206 | |
Provision for loan losses | | | 892 | | | | 794 | | | | 289 | | | | 1,415 | | | | 45 | | | | 123 | | | | 3,558 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses, September 30, 2014 | | $ | 8,726 | | | $ | 4,198 | | | $ | 2,561 | | | $ | 2,073 | | | $ | 79 | | | $ | 206 | | | $ | 17,843 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Transactions in the allowance for loan losses for the three months ended September 30, 2013 were as follows: |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial, | | | | | | Residential | | | | | | | | | | | | | |
| | Industrial, and | | | Commercial | | | Real | | | | | | Credit | | | | | | | |
| | Agricultural | | | Mortgages | | | Estate | | | Consumer | | | Cards | | | Overdrafts | | | Total | |
Allowance for loan losses, July 1, 2013 | | $ | 5,338 | | | $ | 5,896 | | | $ | 2,508 | | | $ | 1,555 | | | $ | 55 | | | $ | 148 | | | $ | 15,500 | |
Charge-offs | | | (169 | ) | | | (4 | ) | | | (57 | ) | | | (269 | ) | | | (19 | ) | | | (72 | ) | | | (590 | ) |
Recoveries | | | 0 | | | | 1,424 | | | | 1 | | | | 21 | | | | 3 | | | | 16 | | | | 1,465 | |
Provision (benefit) for loan losses | | | 384 | | | | (275 | ) | | | 189 | | | | 454 | | | | 18 | | | | 76 | | | | 846 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses, September 30, 2013 | | $ | 5,553 | | | $ | 7,041 | | | $ | 2,641 | | | $ | 1,761 | | | $ | 57 | | | $ | 168 | | | $ | 17,221 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Transactions in the allowance for loan losses for the nine months ended September 30, 2013 were as follows: |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial, | | | | | | Residential | | | | | | | | | | | | | |
| | Industrial, and | | | Commercial | | | Real | | | | | | Credit | | | | | | | |
| | Agricultural | | | Mortgages | | | Estate | | | Consumer | | | Cards | | | Overdrafts | | | Total | |
Allowance for loan losses, January 1, 2013 | | $ | 4,940 | | | $ | 4,697 | | | $ | 2,466 | | | $ | 1,699 | | | $ | 83 | | | $ | 175 | | | $ | 14,060 | |
Charge-offs | | | (253 | ) | | | (1,534 | ) | | | (398 | ) | | | (946 | ) | | | (48 | ) | | | (163 | ) | | | (3,342 | ) |
Recoveries | | | 7 | | | | 1,427 | | | | 5 | | | | 95 | | | | 13 | | | | 65 | | | | 1,612 | |
Provision (benefit) for loan losses | | | 859 | | | | 2,451 | | | | 568 | | | | 913 | | | | 9 | | | | 91 | | | | 4,891 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses, September 30, 2013 | | $ | 5,553 | | | $ | 7,041 | | | $ | 2,641 | | | $ | 1,761 | | | $ | 57 | | | $ | 168 | | | $ | 17,221 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and is based on the Corporation’s impairment method as of September 30, 2014 and December 31, 2013. The recorded investment in loans excludes accrued interest and unearned discounts due to their insignificance. |
|
September 30, 2014 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial, | | | Commercial | | | Residential | | | Consumer | | | Credit | | | Overdrafts | | | Total | |
Industrial, and | Mortgages | Real | Cards |
Agricultural | | Estate | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending allowance balance attributable to loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 339 | | | $ | 296 | | | $ | 201 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 836 | |
Collectively evaluated for impairment | | | 8,276 | | | | 2,288 | | | | 2,360 | | | | 2,073 | | | | 79 | | | | 206 | | | | 15,282 | |
Acquired with deteriorated credit quality | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
Modified in a troubled debt restructuring | | | 111 | | | | 1,614 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1,725 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total ending allowance balance | | $ | 8,726 | | | $ | 4,198 | | | $ | 2,561 | | | $ | 2,073 | | | $ | 79 | | | $ | 206 | | | $ | 17,843 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 4,173 | | | $ | 1,084 | | | $ | 551 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 5,808 | |
Collectively evaluated for impairment | | | 418,225 | | | | 325,143 | | | | 494,248 | | | | 67,753 | | | | 5,079 | | | | 445 | | | | 1,310,893 | |
Acquired with deteriorated credit quality | | | 0 | | | | 2,217 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 2,217 | |
Modified in a troubled debt restructuring | | | 1,661 | | | | 10,001 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 11,662 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total ending loans balance | | $ | 424,059 | | | $ | 338,445 | | | $ | 494,799 | | | $ | 67,753 | | | $ | 5,079 | | | $ | 445 | | | $ | 1,330,580 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
December 31, 2013 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Commercial, | | | Commercial | | | Residential | | | Consumer | | | Credit | | | Overdrafts | | | Total | |
Industrial, and | Mortgages | Real Estate | Cards |
Agricultural | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending allowance balance attributable to loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 372 | | | $ | 55 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 427 | |
Collectively evaluated for impairment | | | 7,725 | | | | 2,141 | | | | 2,450 | | | | 1,763 | | | | 66 | | | | 207 | | | | 14,352 | |
Acquired with deteriorated credit quality | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
Modified in a troubled debt restructuring | | | 115 | | | | 1,340 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1,455 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total ending allowance balance | | $ | 8,212 | | | $ | 3,536 | | | $ | 2,450 | | | $ | 1,763 | | | $ | 66 | | | $ | 207 | | | $ | 16,234 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | | $ | 4,923 | | | $ | 1,249 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 6,172 | |
Collectively evaluated for impairment | | | 421,002 | | | | 329,645 | | | | 459,114 | | | | 63,491 | | | | 5,065 | | | | 409 | | | | 1,278,726 | |
Acquired with deteriorated credit quality | | | 0 | | | | 2,225 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 2,225 | |
Modified in a troubled debt restructuring | | | 1,790 | | | | 10,346 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 12,136 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total ending loans balance | | $ | 427,715 | | | $ | 343,465 | | | $ | 459,114 | | | $ | 63,491 | | | $ | 5,065 | | | $ | 409 | | | $ | 1,299,259 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The following tables present information related to loans individually evaluated for impairment, including loans modified in troubled debt restructurings, by portfolio segment as of September 30, 2014 and December 31, 2013 and for the three and nine months ended September 30, 2014 and 2013: |
|
September 30, 2014 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Unpaid Principal | | | Recorded | | | Allowance for Loan | | | | | | | | | | | | | | | | | |
Balance | Investment | Losses Allocated | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial, industrial, and agricultural | | $ | 4,051 | | | $ | 4,051 | | | $ | 450 | | | | | | | | | | | | | | | | | |
Commercial mortgage | | | 5,800 | | | | 5,413 | | | | 1,910 | | | | | | | | | | | | | | | | | |
Residential real estate | | | 400 | | | | 400 | | | | 201 | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial, industrial, and agricultural | | | 2,680 | | | | 1,783 | | | | 0 | | | | | | | | | | | | | | | | | |
Commercial mortgage | | | 5,671 | | | | 5,672 | | | | 0 | | | | | | | | | | | | | | | | | |
Residential real estate | | | 152 | | | | 151 | | | | 0 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 18,754 | | | $ | 17,470 | | | $ | 2,561 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
|
December 31, 2013 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Unpaid Principal | | | Recorded | | | Allowance for Loan | | | | | | | | | | | | | | | | | |
Balance | Investment | Losses Allocated | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial, industrial, and agricultural | | $ | 5,929 | | | $ | 4,679 | | | $ | 487 | | | | | | | | | | | | | | | | | |
Commercial mortgage | | | 5,646 | | | | 5,443 | | | | 1,395 | | | | | | | | | | | | | | | | | |
Residential real estate | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial, industrial, and agricultural | | | 2,055 | | | | 2,034 | | | | 0 | | | | | | | | | | | | | | | | | |
Commercial mortgage | | | 6,178 | | | | 6,152 | | | | 0 | | | | | | | | | | | | | | | | | |
Residential real estate | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 19,808 | | | $ | 18,308 | | | $ | 1,882 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2014 | | | Nine Months Ended September 30, 2014 | | | | | |
| | Average | | | Interest | | | Cash Basis | | | Average | | | Interest | | | Cash Basis | | | | | |
| | Recorded | | | Income | | | Interest | | | Recorded | | | Income | | | Interest | | | | | |
| | Investment | | | Recognized | | | Recognized | | | Investment | | | Recognized | | | Recognized | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial, industrial, and agricultural | | $ | 4,023 | | | $ | 62 | | | $ | 62 | | | $ | 4,342 | | | $ | 64 | | | $ | 64 | | | | | |
Commercial mortgage | | | 5,511 | | | | 18 | | | | 18 | | | | 5,415 | | | | 18 | | | | 18 | | | | | |
Residential real estate | | | 400 | | | | 45 | | | | 45 | | | | 200 | | | | 56 | | | | 56 | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial, industrial, and agricultural | | | 2,012 | | | | 32 | | | | 32 | | | | 2,071 | | | | 32 | | | | 32 | | | | | |
Commercial mortgage | | | 6,288 | | | | 22 | | | | 22 | | | | 6,080 | | | | 22 | | | | 22 | | | | | |
Residential real estate | | | 76 | | | | 0 | | | | 0 | | | | 38 | | | | 0 | | | | 0 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 18,310 | | | $ | 179 | | | $ | 179 | | | $ | 18,146 | | | $ | 192 | | | $ | 192 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2013 | | | Nine Months Ended September 30, 2013 | | | | | |
| | Average | | | Interest | | | Cash Basis | | | Average | | | Interest | | | Cash Basis | | | | | |
| | Recorded | | | Income | | | Interest | | | Recorded | | | Income | | | Interest | | | | | |
| | Investment | | | Recognized | | | Recognized | | | Investment | | | Recognized | | | Recognized | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial, industrial, and agricultural | | $ | 1,267 | | | $ | 3 | | | $ | 3 | | | $ | 1,439 | | | $ | 4 | | | $ | 4 | | | | | |
Commercial mortgage | | | 8,337 | | | | 0 | | | | 0 | | | | 7,657 | | | | 3 | | | | 3 | | | | | |
Residential real estate | | | 0 | | | | 1 | | | | 1 | | | | 191 | | | | 4 | | | | 4 | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial, industrial, and agricultural | | | 2,055 | | | | 0 | | | | 0 | | | | 2,121 | | | | 0 | | | | 0 | | | | | |
Commercial mortgage | | | 10,602 | | | | 0 | | | | 0 | | | | 10,888 | | | | 0 | | | | 0 | | | | | |
Residential real estate | | | 69 | | | | 0 | | | | 0 | | | | 138 | | | | 0 | | | | 0 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 22,330 | | | $ | 4 | | | $ | 4 | | | $ | 22,434 | | | $ | 11 | | | $ | 11 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
|
The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still accruing interest by class of loans as of September 30, 2014 and December 31, 2013: |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2014 | | | December 31, 2013 | | | | | | | | | | | | | |
| | Nonaccrual | | | Past Due Over | | | Nonaccrual | | | Past Due Over | | | | | | | | | | | | | |
90 Days | 90 Days | | | | | | | | | | | | |
Still on | Still on | | | | | | | | | | | | |
Accrual | Accrual | | | | | | | | | | | | |
Commercial, industrial, and agricultural | | $ | 1,272 | | | $ | 0 | | | $ | 1,006 | | | $ | 0 | | | | | | | | | | | | | |
Commercial mortgages | | | 5,002 | | | | 199 | | | | 7,236 | | | | 0 | | | | | | | | | | | | | |
Residential real estate | | | 3,048 | | | | 106 | | | | 2,389 | | | | 150 | | | | | | | | | | | | | |
Consumer | | | 1,090 | | | | 0 | | | | 942 | | | | 170 | | | | | | | | | | | | | |
Credit cards | | | 0 | | | | 45 | | | | 0 | | | | 24 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 10,412 | | | $ | 350 | | | $ | 11,573 | | | $ | 344 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Nonaccrual loans and loans past due over 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. |
|
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 following table presents the aging of the recorded investment in past due loans as of September 30, 2014 and December 31, 2013 by class of loans. |
|
September 30, 2014 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 30-59 Days | | | 60-89 Days | | | Greater Than | | | Total Past | | | Loans Not | | | Total | | | | | |
Past Due | Past Due | 90 Days | Due | Past Due | | | | |
| | Past Due | | | | | | |
Commercial, industrial, and agricultural | | $ | 1,114 | | | $ | 834 | | | $ | 665 | | | $ | 2,613 | | | $ | 421,446 | | | $ | 424,059 | | | | | |
Commercial mortgages | | | 0 | | | | 1,160 | | | | 5,201 | | | | 6,361 | | | | 332,084 | | | | 338,445 | | | | | |
Residential real estate | | | 2,300 | | | | 689 | | | | 3,154 | | | | 6,143 | | | | 488,656 | | | | 494,799 | | | | | |
Consumer | | | 202 | | | | 70 | | | | 1,090 | | | | 1,362 | | | | 66,391 | | | | 67,753 | | | | | |
Credit cards | | | 0 | | | | 56 | | | | 45 | | | | 101 | | | | 4,978 | | | | 5,079 | | | | | |
Overdrafts | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 445 | | | | 445 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 3,616 | | | $ | 2,809 | | | $ | 10,155 | | | $ | 16,580 | | | $ | 1,314,000 | | | $ | 1,330,580 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
December 31, 2013 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 30-59 Days | | | 60-89 Days | | | Greater Than | | | Total Past | | | Loans Not | | | Total | | | | | |
Past Due | Past Due | 90 Days | Due | Past Due | | | | |
| | Past Due | | | | | | |
Commercial, industrial, and agricultural | | $ | 211 | | | $ | 542 | | | $ | 855 | | | $ | 1,608 | | | $ | 426,107 | | | $ | 427,715 | | | | | |
Commercial mortgages | | | 1,258 | | | | 713 | | | | 7,236 | | | | 9,207 | | | | 334,258 | | | | 343,465 | | | | | |
Residential real estate | | | 4,216 | | | | 114 | | | | 2,539 | | | | 6,869 | | | | 452,245 | | | | 459,114 | | | | | |
Consumer | | | 334 | | | | 1,049 | | | | 1,112 | | | | 2,495 | | | | 60,996 | | | | 63,491 | | | | | |
Credit cards | | | 0 | | | | 29 | | | | 24 | | | | 53 | | | | 5,012 | | | | 5,065 | | | | | |
Overdrafts | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 409 | | | | 409 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 6,019 | | | $ | 2,447 | | | $ | 11,766 | | | $ | 20,232 | | | $ | 1,279,027 | | | $ | 1,299,259 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Troubled Debt Restructurings |
|
The terms of certain loans have been modified as troubled debt restructurings. The modification of the terms of such loans included either or both of the following: a reduction of the stated interest rate of the loan or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk. |
|
|
|
The following table presents the number of loans, loan balances, and specific reserves for loans that have been restructured in a troubled debt restructuring as of September 30, 2014 and December 31, 2013. |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2014 | | | December 31, 2013 | | | | | |
| | Number of | | | Loan | | | Specific | | | Number of | | | Loan | | | Specific | | | | | |
Loans | Balance | Reserve | Loans | Balance | Reserve | | | | |
Commercial, industrial, and agricultural | | | 5 | | | $ | 1,661 | | | $ | 111 | | | | 5 | | | $ | 1,790 | | | $ | 115 | | | | | |
Commercial mortgages | | | 7 | | | | 10,001 | | | | 1,614 | | | | 7 | | | | 10,346 | | | | 1,340 | | | | | |
Residential real estate | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | |
Consumer | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | |
Credit cards | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 12 | | | $ | 11,662 | | | $ | 1,725 | | | | 12 | | | $ | 12,136 | | | $ | 1,455 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
There were no loans modified as troubled debt restructurings during the three or nine months ended September 30, 2014. The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2013. There were no loans modified as troubled debt restructurings during the three months ended September 30, 2013. |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2013 | | | | | | | | | | | | | | | | | |
| | Number of | | | Pre-Modification | | | Post-Modification | | | | | | | | | | | | | | | | | |
Loans | Outstanding Recorded | Outstanding Recorded | | | | | | | | | | | | | | | | |
| Investment | Investment | | | | | | | | | | | | | | | | |
Commercial, industrial, and agricultural | | | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | | | | | | |
Commercial mortgages | | | 2 | | | | 3,615 | | | | 3,549 | | | | | | | | | | | | | | | | | |
Residential real estate | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | |
Consumer | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | |
Credit cards | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 2 | | | $ | 3,615 | | | $ | 3,549 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The troubled debt restructurings described above increased the allowance for loan losses by $562 during the three months and nine months ended September 30, 2013. |
|
Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from 4 to 15 years. Modifications involving an extension of the maturity date were for periods ranging from 4 to 18 years. |
|
A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. Except as discussed below, all loans modified in troubled debt restructurings are performing in accordance with their modified terms as of September 30, 2014 and December 31, 2013 and no principal balances were forgiven in connection with the loan restructurings. |
|
In the first quarter of 2013, the Corporation recorded a partial chargeoff of $595 for a commercial mortgage loan with a balance of $1,660 that had defaulted under its restructured terms in 2012 and was placed on nonaccrual status. The Corporation recorded an additional provision for loan losses of $127 and $262 on this loan during the three and nine months ended September 30, 2013. |
|
During the year ended December 31, 2013, a commercial mortgage loan with a balance of $1,086 defaulted under its restructured terms in 2013 and was placed on nonaccrual status. The Corporation recorded an additional provision for loan losses of $615 on this loan during the year ended December 31, 2013. |
|
In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without a loan modification. This evaluation is performed using the Corporation’s internal underwriting policies. The Corporation has no further loan commitments to customers whose loans are classified as a troubled debt restructuring. |
|
|
|
Generally, non-performing troubled debt restructurings 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. |
|
Credit Quality Indicators |
|
The Corporation classifies commercial, industrial, and agricultural loans and commercial mortgage loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans with outstanding balances greater than $1 million are analyzed at least semiannually and loans with outstanding balances of less than $1 million are analyzed at least annually. |
|
The Corporation uses the following definitions for risk ratings: |
|
Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Corporation’s credit position at some future date. |
|
Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. |
|
Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. |
|
Loans not rated as special mention, substandard, or doubtful are considered to be pass rated loans. All loans included in the following tables have been assigned a risk rating within 12 months of the balance sheet date. |
|
As discussed earlier, during the first and second quarters of 2014, management reviewed its loan portfolio segments and reclassified certain loan balances into the Commercial, Industrial and Agricultural segment and out of the Commercial and Residential Mortgage segments. Accordingly, the December 31, 2013 loan portfolio segment balances, along with the special mention, substandard and doubtful categories, were reclassified to conform to the September 30, 2014 presentation. These reclassifications resulted in increasing the Commercial, Industrial and Agriculture special mention category by $3.0 million and the substandard category by $10.6 million. Corresponding reclassification decreases were made to the Commercial Mortgage category. Total special mention and substandard loans were not changed. |
|
September 30, 2014 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Pass | | | Special | | | Substandard | | | Doubtful | | | Total | | | | | | | | | |
Mention | | | | | | | | |
Commercial, industrial, and agricultural | | $ | 386,235 | | | $ | 8,630 | | | $ | 28,874 | | | $ | 320 | | | $ | 424,059 | | | | | | | | | |
Commercial mortgages | | | 311,135 | | | | 147 | | | | 26,722 | | | | 441 | | | | 338,445 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 697,370 | | | $ | 8,777 | | | $ | 55,596 | | | $ | 761 | | | $ | 762,504 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
December 31, 2013 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Special | | | | | | | | | | | | | | | | | | |
| | Pass | | | Mention | | | Substandard | | | Doubtful | | | Total | | | | | | | | | |
Commercial, industrial, and agricultural | | $ | 388,868 | | | $ | 8,510 | | | $ | 29,956 | | | $ | 381 | | | $ | 427,715 | | | | | | | | | |
Commercial mortgages | | | 295,060 | | | | 13,622 | | | | 34,298 | | | | 485 | | | | 343,465 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 683,928 | | | $ | 22,132 | | | $ | 64,254 | | | $ | 866 | | | $ | 771,180 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential real estate, consumer, and credit card loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. |
|
|
|
The following table presents the recorded investment in residential, consumer, and credit card loans based on payment activity as of September 30, 2014 and December 31, 2013: |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2014 | | | December 31, 2013 | | | | | |
| | Residential | | | | | | Credit | | | Residential | | | | | | Credit | | | | | |
| | Real Estate | | | Consumer | | | Cards | | | Real Estate | | | Consumer | | | Cards | | | | | |
Performing | | $ | 491,645 | | | $ | 66,663 | | | $ | 5,034 | | | $ | 456,575 | | | $ | 62,379 | | | $ | 5,041 | | | | | |
Non-performing | | | 3,154 | | | | 1,090 | | | | 45 | | | | 2,539 | | | | 1,112 | | | | 24 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 494,799 | | | $ | 67,753 | | | $ | 5,079 | | | $ | 459,114 | | | $ | 63,491 | | | $ | 5,065 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
The Corporation’s portfolio of residential real estate and consumer loans maintained within Holiday Financial Services Corporation (“Holiday”), a subsidiary that offers small balance unsecured and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics than are typical in the Bank’s consumer loan portfolio, are considered to be subprime loans. Holiday’s loan portfolio is summarized as follows at September 30, 2014 and December 31, 2013: |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, | | | December 31, | | | | | | | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | | | | | |
Consumer | | $ | 26,976 | | | $ | 24,891 | | | | | | | | | | | | | | | | | | | | | |
Residential real estate | | | 1,332 | | | | 1,552 | | | | | | | | | | | | | | | | | | | | | |
Less: unearned discount | | | (4,205 | ) | | | (3,896 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 24,103 | | | $ | 22,547 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |