Allowance for Loan Losses and Credit Quality of Loans | 3 Months Ended |
Mar. 31, 2015 |
Allowance for Loan Losses and Credit Quality of Loans [Abstract] | |
Allowance for Loan Losses and Credit Quality of Loans | Note 4. | Allowance for Loan Losses and Credit Quality of Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Allowance for Loan Losses |
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The allowance for loan losses is maintained at a level estimated by management to provide adequately for risk of probable losses inherent in the current loan portfolio. The adequacy of the allowance for loan losses is continuously monitored. It is assessed for adequacy using a methodology designed to ensure the level of the allowance reasonably reflects the loan portfolio's risk profile. It is evaluated to ensure that it is sufficient to absorb all reasonably estimable credit losses inherent in the current loan portfolio. |
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To develop and document a systematic methodology for determining the allowance for loan losses, the Company has divided the loan portfolio into three segments, each with different risk characteristics and methodologies for assessing risk. Those segments are further segregated between our loans accounted for under the amortized cost method (referred to as "originated" loans) and loans acquired in a business combination (referred to as "acquired" loans). Each portfolio segment is broken down into class segments where appropriate. Class segments contain unique measurement attributes, risk characteristics and methods for monitoring and assessing risk that are necessary to develop the allowance for loan losses. Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class segment. The following table illustrates the portfolio and class segments for the Company's loan portfolio: |
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Portfolio | Class | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Loans | Commercial | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial Real Estate | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Agricultural | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Agricultural Real Estate | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Business Banking | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Loans | Indirect | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Home Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Direct | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential Real Estate Mortgages | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Commercial Loans |
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The Company offers a variety of commercial loan products including commercial (non-real estate), commercial real estate, agricultural, agricultural real estate, and business banking loans. The Company's underwriting analysis for commercial loans typically includes credit verification, independent appraisals, a review of the borrower's financial condition, and a detailed analysis of the borrower's underlying cash flows. |
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Commercial – The Company offers a variety of loan options to meet the specific needs of our commercial customers including term loans, time notes and lines of credit. Such loans are made available to businesses for working capital needs such as inventory and receivables, business expansion and equipment purchases. Generally, a collateral lien is placed on equipment or other assets owned by the borrower. These loans carry a higher risk than commercial real estate loans due to the nature of the underlying collateral, which can be business assets such as equipment and accounts receivable. To reduce the risk, management also attempts to secure real estate as collateral and obtain personal guarantees of the borrowers. |
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Commercial Real Estate – The Company offers commercial real estate loans to finance real estate purchases, refinancings, expansions and improvements to commercial properties. Commercial real estate loans are made to finance the purchases of real estate, generally with completed structures. These commercial real estate loans are secured by first liens on the real estate, which may include apartments, commercial structures, housing businesses, healthcare facilities, and other non owner-occupied facilities. These loans are typically less risky than commercial loans, since they are secured by real estate and buildings, and are generally originated in amounts of no more than 80% of the appraised value of the property. |
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Agricultural – The Company offers a variety of agricultural loans to meet the needs of our agricultural customers including term loans, time notes, and lines of credit. These loans are made to purchase livestock, purchase and modernize equipment, and finance seasonal crop expenses. Generally, a collateral lien is placed on the livestock, equipment, produce inventories, and/or receivables owned by the borrower. These loans may carry a higher risk than commercial and agricultural real estate loans due to the industry price volatility, and in some cases, the perishable nature of the underlying collateral. To reduce these risks, management may attempt to secure these loans with additional real estate collateral, obtain personal guarantees of the borrowers, or obtain government loan guarantees to provide further support. |
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Agricultural Real Estate – The Company offers real estate loans to our agricultural customers to finance farm related real estate purchases, refinancings, expansions, and improvements to agricultural properties such as barns, production facilities, and land. The agricultural real estate loans are secured by first liens on the farm real estate. Because they are secured by land and buildings, these loans may be less risky than agricultural loans. These loans are typically originated in amounts of no more than 75% of the appraised value of the property. Government loan guarantees may be obtained to provide further support. |
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Business Banking - The Company offers a variety of loan options to meet the specific needs of our business banking customers including term loans, business banking mortgages and lines of credit. Such loans are generally less than $0.5 million and are made available to businesses for working capital such as inventory and receivables, business expansion, equipment purchases, and agricultural needs. Generally, a collateral lien is placed on equipment or other assets owned by the borrower such as inventory and/or receivables. These loans carry a higher risk than commercial loans due to the smaller size of the borrower and lower levels of capital. To reduce the risk, the Company obtains personal guarantees of the owners for a majority of the loans. |
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Consumer Loans |
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The Company offers a variety of consumer loan products including indirect, home equity, and direct loans. |
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Indirect – The Company maintains relationships with many dealers primarily in the communities that we serve. Through these relationships, the company primarily finances the purchases of automobiles and recreational vehicles (such as campers, boats, etc.) indirectly through dealer relationships. Approximately 75% of the indirect relationships represent automobile financing. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from three to six years, based upon the nature of the collateral and the size of the loan. The majority of indirect consumer loans are underwritten on a secured basis using the underlying collateral being financed. |
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Home Equity – The Company offers fixed home equity loans as well as home equity lines of credit to consumers to finance home improvements, debt consolidation, education and other uses. Consumers are able to borrow up to 85% of the equity in their homes. The Company originates home equity lines of credit and second mortgage loans (loans secured by a second junior lien position on one-to-four-family residential real estate). These loans carry a higher risk than first mortgage residential loans as they are in a second position with respect to collateral. Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate. |
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Direct – The Company offers a variety of consumer installment loans to finance vehicle purchases, mobile home purchases and personal expenditures. Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging from one to ten years, based upon the nature of the collateral and the size of the loan. The majority of consumer loans are underwritten on a secured basis using the underlying collateral being financed or a customer's deposit account. In addition to installment loans, the Company also offers personal lines of credit and overdraft protection. A minimal amount of loans are unsecured, which carry a higher risk of loss. |
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Residential Real Estate Mortgages |
Residential real estate loans consist primarily of loans secured by first or second deeds of trust on primary residences. We originate adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a mortgage. These loans are collateralized by owner-occupied properties located in the Company's market area. Loans on one-to-four-family residential real estate are generally originated in amounts of no more than 85% of the purchase price or appraised value (whichever is lower), or have private mortgage insurance. The Company's underwriting analysis for residential mortgage loans typically includes credit verification, independent appraisals, and a review of the borrower's financial condition. Mortgage title insurance and hazard insurance are normally required. Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic site inspections, including one at each loan draw period. |
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For purposes of evaluating the adequacy of the allowance, the Company considers a number of significant factors that affect the collectability of the portfolio. For individually analyzed loans, these include estimates of loss exposure, which reflect the facts and circumstances that affect the likelihood of repayment of such loans as of the evaluation date. For homogeneous pools of loans, estimates of the Company's exposure to credit loss reflect a current assessment of a number of factors, which could affect collectability. These factors include: past loss experience; size, trend, composition, and nature of loans; changes in lending policies and procedures, including underwriting standards and collection, charge-offs and recoveries; trends experienced in nonperforming and delinquent loans; current economic conditions in the Company's market; portfolio concentrations that may affect loss experienced across one or more components of the portfolio; the effect of external factors such as competition, legal and regulatory requirements; and the experience, ability, and depth of lending management and staff. In addition, various regulatory agencies, as an integral component of their examination process, periodically review the Company's allowance for loan losses. Such agencies may require the Company to make loan grade changes as well as recognize additions to the allowance based on their examinations. |
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After a thorough consideration of the factors discussed above, any required additions or reductions to the allowance for loan losses are made periodically by charges or credits to the provision for loan losses. These charges or credits are necessary to maintain the allowance at a level which management believes is reasonably reflective of overall inherent risk of probable loss in the portfolio. While management uses available information to recognize losses on loans, additions and reductions of the allowance may fluctuate from one reporting period to another. These fluctuations are reflective of changes in risk associated with portfolio content and/or changes in management's assessment of any or all of the determining factors discussed above. |
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The following tables illustrate the changes in the allowance for loan losses by our portfolio segments for the three months ended March 31, 2015 and 2014: |
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Three months ended March 31, | | Commercial Loans | | | Consumer Loans | | | Residential Real Estate Mortgages | | | Unallocated | | | Total | | | | | | | | | |
Balance as of December 31, 2014 | | $ | 32,433 | | | $ | 26,720 | | | $ | 7,130 | | | $ | 76 | | | $ | 66,359 | | | | | | | | | |
Charge-offs | | | (798 | ) | | | (4,378 | ) | | | (504 | ) | | | - | | | | (5,680 | ) | | | | | | | | |
Recoveries | | | 234 | | | | 748 | | | | 56 | | | | - | | | | 1,038 | | | | | | | | | |
Provision | | | (591 | ) | | | 3,066 | | | | 1,016 | | | | 151 | | | | 3,642 | | | | | | | | | |
Ending Balance as of March 31, 2015 | | $ | 31,278 | | | $ | 26,156 | | | $ | 7,698 | | | $ | 227 | | | $ | 65,359 | | | | | | | | | |
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Balance as of December 31, 2013 | | $ | 35,090 | | | $ | 27,694 | | | $ | 6,520 | | | $ | 130 | | | $ | 69,434 | | | | | | | | | |
Charge-offs | | | (479 | ) | | | (4,032 | ) | | | (319 | ) | | | - | | | | (4,830 | ) | | | | | | | | |
Recoveries | | | 399 | | | | 741 | | | | 94 | | | | - | | | | 1,234 | | | | | | | | | |
Provision | | | (573 | ) | | | 4,033 | | | | (70 | ) | | | 206 | | | | 3,596 | | | | | | | | | |
Ending Balance as of March 31, 2014 | | $ | 34,437 | | | $ | 28,436 | | | $ | 6,225 | | | $ | 336 | | | $ | 69,434 | | | | | | | | | |
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As of March 31, 2015, included in the above tables, there was $1.9 million in the allowance for loan losses related to acquired commercial loans. There was no allowance as of March 31, 2014 related to acquired loans. Net charge-offs related to acquired loans totaled approximately $0.6 million and $0.2 million during the three months ended March 31, 2015 and 2014, respectively, and are included in the table above. |
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The following tables illustrate the allowance for loan losses and the recorded investment by portfolio segments as of March 31, 2015 and December 31, 2014: |
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Allowance for Loan Losses and Recorded Investment in Loans |
(in thousands) |
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| | Commercial Loans | | | Consumer Loans | | | Residential Real Estate Mortgages | | | Unallocated | | | Total | | | | | | | | | |
As of March 31, 2015 | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses | | $ | 31,278 | | | $ | 26,156 | | | $ | 7,698 | | | $ | 227 | | | $ | 65,359 | | | | | | | | | |
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Allowance for loans individually evaluated for impairment | | | 2,950 | | | | - | | | | - | | | | | | | | 2,950 | | | | | | | | | |
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Allowance for loans collectively evaluated for impairment | | $ | 28,328 | | | $ | 26,156 | | | $ | 7,698 | | | $ | 227 | | | $ | 62,409 | | | | | | | | | |
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Ending balance of loans | | $ | 2,484,300 | | | $ | 2,013,123 | | | $ | 1,125,600 | | | | | | | $ | 5,623,023 | | | | | | | | | |
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Ending balance of originated loans individually evaluated for impairment | | | 12,253 | | | | 6,423 | | | | 4,269 | | | | | | | | 22,945 | | | | | | | | | |
Ending balance of acquired loans individually evaluated for impairment | | | 9,772 | | | | - | | | | - | | | | | | | | 9,772 | | | | | | | | | |
Ending balance of acquired loans collectively evaluated for impairment | | | 315,466 | | | | 132,675 | | | | 260,857 | | | | | | | | 708,998 | | | | | | | | | |
Ending balance of originated loans collectively evaluated for impairment | | $ | 2,146,809 | | | $ | 1,874,025 | | | $ | 860,474 | | | | | | | $ | 4,881,308 | | | | | | | | | |
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As of December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses | | $ | 32,433 | | | $ | 26,720 | | | $ | 7,130 | | | $ | 76 | | | $ | 66,359 | | | | | | | | | |
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Allowance for loans individually evaluated for impairment | | | 1,100 | | | | - | | | | - | | | | | | | | 1,100 | | | | | | | | | |
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Allowance for loans collectively evaluated for impairment | | $ | 31,333 | | | $ | 26,720 | | | $ | 7,130 | | | $ | 76 | | | $ | 65,259 | | | | | | | | | |
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Ending balance of loans | | $ | 2,473,702 | | | $ | 2,005,980 | | | $ | 1,115,589 | | | | | | | $ | 5,595,271 | | | | | | | | | |
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Ending balance of originated loans individually evaluated for impairment | | | 11,079 | | | | 5,498 | | | | 3,544 | | | | | | | | 20,121 | | | | | | | | | |
Ending balance of acquired loans individually evaluated for impairment | | | 5,675 | | | | - | | | | - | | | | | | | | 5,675 | | | | | | | | | |
Ending balance of acquired loans collectively evaluated for impairment | | | 327,656 | | | | 147,256 | | | | 266,747 | | | | | | | | 741,659 | | | | | | | | | |
Ending balance of originated loans collectively evaluated for impairment | | $ | 2,129,292 | | | $ | 1,853,226 | | | $ | 845,298 | | | | | | | $ | 4,827,816 | | | | | | | | | |
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Credit Quality of Loans |
Loans are placed on nonaccrual status when timely collection of principal and interest in accordance with contractual terms is doubtful. Loans are transferred to nonaccrual status generally when principal or interest payments become ninety days delinquent, unless the loan is well secured and in the process of collection, or sooner when management concludes or circumstances indicate that borrowers may be unable to meet contractual principal or interest payments. When a loan is transferred to a nonaccrual status, all interest previously accrued in the current period but not collected is reversed against interest income in that period. Interest accrued in a prior period and not collected is charged-off against the allowance for loan losses. The Company's nonaccrual policies are the same for all classes of financing receivable. |
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If ultimate repayment of a nonaccrual loan is expected, any payments received are applied in accordance with contractual terms. If ultimate repayment of principal is not expected, any payment received on a nonaccrual loan is applied to principal until ultimate repayment becomes expected. Nonaccrual loans are returned to accrual status when they become current as to principal and interest and demonstrate a period of performance under the contractual terms and, in the opinion of management, are fully collectible as to principal and interest. When in the opinion of management the collection of principal appears unlikely, the loan balance is charged-off in total or in part. For loans in all portfolios, the principal amount is charged off in full or in part as soon as management determines, based on available facts, that the collection of principal in full is improbable. For commercial loans, management considers specific facts and circumstances relative to individual credits in making such a determination. For consumer and residential loan classes, management uses specific guidance and thresholds from the Federal Financial Institutions Examination Council's Uniform Retail Credit Classification and Account Management Policy. |
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The following tables set forth information with regard to past due and nonperforming loans by loan class as of March 31, 2015 and December 31, 2014: |
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Age Analysis of Past Due Financing Receivables |
As of March 31, 2015 |
(in thousands) |
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| | 31-60 DaysPast DueAccruing | | | 61-90 DaysPast DueAccruing | | | Greater Than90 DaysPast DueAccruing | | | TotalPast DueAccruing | | | Non-Accrual | | | Current | | | RecordedTotalLoans | |
ORIGINATED | | | | | | | | | | | | | | | | | | | | | |
Commercial Loans | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 348 | | | $ | - | | | $ | 35 | | | $ | 383 | | | $ | 1,019 | | | $ | 620,111 | | | $ | 621,513 | |
Commercial Real Estate | | | 133 | | | | 37 | | | | - | | | | 170 | | | | 6,231 | | | | 1,076,218 | | | | 1,082,619 | |
Agricultural | | | 129 | | | | - | | | | - | | | | 129 | | | | 800 | | | | 31,080 | | | | 32,009 | |
Agricultural Real Estate | | | 7 | | | | - | | | | - | | | | 7 | | | | 561 | | | | 23,963 | | | | 24,531 | |
Business Banking | | | 602 | | | | 192 | | | | 42 | | | | 836 | | | | 6,624 | | | | 390,930 | | | | 398,390 | |
| | | 1,219 | | | | 229 | | | | 77 | | | | 1,525 | | | | 15,235 | | | | 2,142,302 | | | | 2,159,062 | |
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Consumer Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Indirect | | | 11,794 | | | | 2,348 | | | | 1,722 | | | | 15,864 | | | | 2,056 | | | | 1,327,653 | | | | 1,345,573 | |
Home Equity | | | 3,507 | | | | 804 | | | | 484 | | | | 4,795 | | | | 6,160 | | | | 470,340 | | | | 481,295 | |
Direct | | | 375 | | | | 80 | | | | 22 | | | | 477 | | | | 130 | | | | 52,973 | | | | 53,580 | |
| | | 15,676 | | | | 3,232 | | | | 2,228 | | | | 21,136 | | | | 8,346 | | | | 1,850,966 | | | | 1,880,448 | |
Residential Real Estate Mortgages | | | 3,194 | | | | 1,264 | | | | 255 | | | | 4,713 | | | | 7,518 | | | | 852,512 | | | | 864,743 | |
| | $ | 20,089 | | | $ | 4,725 | | | $ | 2,560 | | | $ | 27,374 | | | $ | 31,099 | | | $ | 4,845,780 | | | $ | 4,904,253 | |
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ACQUIRED | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 42 | | | $ | - | | | $ | - | | | $ | 42 | | | $ | 2,517 | | | $ | 70,010 | | | $ | 72,569 | |
Commercial Real Estate | | | - | | | | - | | | | - | | | | - | | | | 7,247 | | | | 190,518 | | | | 197,765 | |
Business Banking | | | - | | | | 2 | | | | - | | | | 2 | | | | 488 | | | | 54,414 | | | | 54,904 | |
| | | 42 | | | | 2 | | | | - | | | | 44 | | | | 10,252 | | | | 314,942 | | | | 325,238 | |
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Consumer Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Indirect | | | 343 | | | | 44 | | | | 37 | | | | 424 | | | | 146 | | | | 53,577 | | | | 54,147 | |
Home Equity | | | 212 | | | | 50 | | | | - | | | | 262 | | | | 427 | | | | 73,029 | | | | 73,718 | |
Direct | | | 76 | | | | 4 | | | | 4 | | | | 84 | | | | 28 | | | | 4,698 | | | | 4,810 | |
| | | 631 | | | | 98 | | | | 41 | | | | 770 | | | | 601 | | | | 131,304 | | | | 132,675 | |
Residential Real Estate Mortgages | | | 1,472 | | | | 650 | | | | - | | | | 2,122 | | | | 3,101 | | | | 255,634 | | | | 260,857 | |
| | $ | 2,145 | | | $ | 750 | | | $ | 41 | | | $ | 2,936 | | | $ | 13,954 | | | $ | 701,880 | | | $ | 718,770 | |
Total Loans | | $ | 22,234 | | | $ | 5,475 | | | $ | 2,601 | | | $ | 30,310 | | | $ | 45,053 | | | $ | 5,547,660 | | | $ | 5,623,023 | |
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Age Analysis of Past Due Financing Receivables |
As of December 31, 2014 |
(in thousands) |
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| | 31-60 DaysPast DueAccruing | | | 61-90 DaysPast DueAccruing | | | Greater Than90 DaysPast DueAccruing | | | TotalPast DueAccruing | | | Non-Accrual | | | Current | | | RecordedTotalLoans | |
ORIGINATED | | | | | | | | | | | | | | | | | | | | | |
Commercial Loans | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | - | | | $ | 735 | | | $ | - | | | $ | 735 | | | $ | 1,012 | | | $ | 613,400 | | | $ | 615,147 | |
Commercial Real Estate | | | 192 | | | | - | | | | - | | | | 192 | | | | 4,127 | | | | 1,064,549 | | | | 1,068,868 | |
Agricultural | | | - | | | | - | | | | - | | | | - | | | | 817 | | | | 32,130 | | | | 32,947 | |
Agricultural Real Estate | | | 19 | | | | - | | | | - | | | | 19 | | | | 565 | | | | 24,390 | | | | 24,974 | |
Business Banking | | | 799 | | | | 235 | | | | 84 | | | | 1,118 | | | | 6,910 | | | | 390,407 | | | | 398,435 | |
| | | 1,010 | | | | 970 | | | | 84 | | | | 2,064 | | | | 13,431 | | | | 2,124,876 | | | | 2,140,371 | |
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Consumer Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Indirect | | | 16,434 | | | | 3,154 | | | | 1,991 | | | | 21,579 | | | | 1,964 | | | | 1,286,507 | | | | 1,310,050 | |
Home Equity | | | 4,591 | | | | 1,428 | | | | 821 | | | | 6,840 | | | | 6,596 | | | | 479,444 | | | | 492,880 | |
Direct | | | 560 | | | | 157 | | | | 52 | | | | 769 | | | | 84 | | | | 54,941 | | | | 55,794 | |
| | | 21,585 | | | | 4,739 | | | | 2,864 | | | | 29,188 | | | | 8,644 | | | | 1,820,892 | | | | 1,858,724 | |
Residential Real Estate Mortgages | | | 2,901 | | | | 96 | | | | 1,256 | | | | 4,253 | | | | 8,770 | | | | 835,819 | | | | 848,842 | |
| | $ | 25,496 | | | $ | 5,805 | | | $ | 4,204 | | | $ | 35,505 | | | $ | 30,845 | | | $ | 4,781,587 | | | $ | 4,847,937 | |
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ACQUIRED | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | 3,009 | | | $ | 72,255 | | | $ | 75,264 | |
Commercial Real Estate | | | - | | | | - | | | | - | | | | - | | | | 2,666 | | | | 197,222 | | | | 199,888 | |
Business Banking | | | 5 | | | | 15 | | | | - | | | | 20 | | | | 665 | | | | 57,494 | | | | 58,179 | |
| | | 5 | | | | 15 | | | | - | | | | 20 | | | | 6,340 | | | | 326,971 | | | | 333,331 | |
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Consumer Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Indirect | | | 518 | | | | 5 | | | | 54 | | | | 577 | | | | 106 | | | | 64,540 | | | | 65,223 | |
Home Equity | | | 190 | | | | 60 | | | | 5 | | | | 255 | | | | 557 | | | | 75,904 | | | | 76,716 | |
Direct | | | 31 | | | | - | | | | 7 | | | | 38 | | | | 33 | | | | 5,246 | | | | 5,317 | |
| | | 739 | | | | 65 | | | | 66 | | | | 870 | | | | 696 | | | | 145,690 | | | | 147,256 | |
Residential Real Estate Mortgages | | | 1,162 | | | | 265 | | | | 671 | | | | 2,098 | | | | 3,193 | | | | 261,456 | | | | 266,747 | |
| | $ | 1,906 | | | $ | 345 | | | $ | 737 | | | $ | 2,988 | | | $ | 10,229 | | | $ | 734,117 | | | $ | 747,334 | |
Total Loans | | $ | 27,402 | | | $ | 6,150 | | | $ | 4,941 | | | $ | 38,493 | | | $ | 41,074 | | | $ | 5,515,704 | | | $ | 5,595,271 | |
|
|
There were no material commitments to extend further credit to borrowers with nonperforming loans. |
|
Impaired Loans |
The methodology used to establish the allowance for loan losses on impaired loans incorporates specific allocations on loans analyzed individually. Classified and nonperforming loans with outstanding balances of $0.5 million or more and all troubled debt restructured loans ("TDRs") are evaluated for impairment through the Company's quarterly status review process. In determining that we will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreements, we consider factors such as payment history and changes in the financial condition of individual borrowers, local economic conditions, historical loss experience and the conditions of the various markets in which the collateral may be liquidated. For loans that are impaired as defined by accounting standards, impairment is measured by one of three methods: 1) the fair value of collateral less cost to sell, 2) present value of expected future cash flows discounted at the loan's original effective interest rate or 3) the loan's observable market price. All impaired loans are reviewed on a quarterly basis for changes in the measurement of impairment. Any change to the previously recognized impairment loss is recognized as a change to the allowance account and recorded in the consolidated statement of income as a component of the provision for loan losses. |
|
The following table provides information on loans specifically evaluated for impairment as of March 31, 2015 and December 31, 2014: |
|
| | 31-Mar-15 | | | 31-Dec-14 | | | | | |
(in thousands) | | Recorded | | | Unpaid | | Related | | | Recorded | | | Unpaid | | Related | | | | | |
Investment | Principal | Allowance | Investment | Principal | Allowance | | | | |
Balance(Book) | Balance(Legal) | | Balance(Book) | Balance(Legal) | | | | | |
ORIGINATED | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | |
Commercial Loans | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 1,628 | | | $ | 1,781 | | | | | $ | 1,748 | | | $ | 1,901 | | | | | | | |
Commercial Real Estate | | | 4,227 | | | | 4,238 | | | | | | 4,505 | | | | 4,520 | | | | | | | |
Agricultural | | | 19 | | | | 25 | | | | | | 20 | | | | 26 | | | | | | | |
Agricultural Real Estate | | | 633 | | | | 759 | | | | | | 1,147 | | | | 1,441 | | | | | | | |
Business Banking | | | 869 | | | | 910 | | | | | | 896 | | | | 1,301 | | | | | | | |
Total Commercial Loans | | | 7,376 | | | | 7,713 | | | | | | 8,316 | | | | 9,189 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Loans | | | | | | | | | | | | | | | | | | | | | | | | |
Indirect | | | 17 | | | | 26 | | | | | | - | | | | - | | | | | | | |
Home Equity | | | 6,403 | | | | 7,056 | | | | | | 5,498 | | | | 6,033 | | | | | | | |
Direct | | | 3 | | | | 3 | | | | | | - | | | | - | | | | | | | |
Total Consumer Loans | | | 6,423 | | | | 7,085 | | | | | | 5,498 | | | | 6,033 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Residential Real Estate Mortgages | | | 4,269 | | | | 4,742 | | | | | | 3,544 | | | | 3,959 | | | | | | | |
Total | | | 18,068 | | | | 19,540 | | | | | | 17,358 | | | | 19,181 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Loans | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate | | | 4,877 | | | | 6,725 | | | $ | 1,100 | | | | 2,763 | | | | 4,611 | | | $ | 600 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ACQUIRED | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With no related allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Real Estate | | | 5,935 | | | | 7,109 | | | | | | | | 2,666 | | | | 3,830 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With an allowance recorded: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 2,508 | | | | 4,668 | | | | 1,000 | | | | 3,009 | | | | 4,668 | | | | 500 | | | | | |
Commercial Real Estate | | | 1,329 | | | | 1,329 | | | | 850 | | | | - | | | | - | | | | - | | | | | |
Total Commercial Loans | | | 3,837 | | | | 5,997 | | | | 1,850 | | | | 3,009 | | | | 4,668 | | | | 500 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total: | | $ | 32,717 | | | $ | 39,371 | | | $ | 2,950 | | | $ | 25,796 | | | $ | 32,290 | | | $ | 1,100 | | | | | |
|
The following tables summarize the average recorded investments on impaired loans specifically evaluated for impairment and the interest income recognized for the three months ended March 31, 2015 and 2014: |
|
| | For the three months ended | | | | | | | | | | | | | |
| | 31-Mar-15 | | | 31-Mar-14 | | | | | | | | | | | | | |
(in thousands) | | Average Recorded Investment | | | Interest Income Recognized | | | Average Recorded Investment | | | Interest Income Recognized | | | | | | | | | | | | | |
ORIGINATED | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Loans | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 1,689 | | | $ | 25 | | | $ | 2,038 | | | $ | - | | | | | | | | | | | | | |
Commercial Real Estate | | | 9,125 | | | | 41 | | | | 11,553 | | | | 42 | | | | | | | | | | | | | |
Agricultural | | | 20 | | | | - | | | | 125 | | | | - | | | | | | | | | | | | | |
Agricultural Real Estate | | | 636 | | | | 11 | | | | 1,424 | | | | 12 | | | | | | | | | | | | | |
Business Banking | | | 873 | | | | 4 | | | | 185 | | | | 12 | | | | | | | | | | | | | |
Consumer Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Indirect | | | 9 | | | | - | | | | - | | | | - | | | | | | | | | | | | | |
Home Equity | | | 6,388 | | | | 72 | | | | 4,282 | | | | 43 | | | | | | | | | | | | | |
Direct | | | 2 | | | | - | | | | - | | | | - | | | | | | | | | | | | | |
Residential Real Estate Mortgage | | | 4,265 | | | | 30 | | | | 2,727 | | | | 23 | | | | | | | | | | | | | |
Total Originated | | $ | 23,007 | | | $ | 183 | | | $ | 22,334 | | | $ | 132 | | | | | | | | | | | | | |
ACQUIRED | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 2,883 | | | | - | | | | 6,436 | | | | - | | | | | | | | | | | | | |
Commercial Real Estate | | | 7,136 | | | | - | | | | 3,524 | | | | - | | | | | | | | | | | | | |
Total Acquired | | $ | 10,019 | | | $ | - | | | $ | 9,960 | | | $ | - | | | | | | | | | | | | | |
Total Loans | | $ | 33,026 | | | $ | 183 | | | $ | 32,294 | | | $ | 132 | | | | | | | | | | | | | |
|
Credit Quality Indicators |
The Company has developed an internal loan grading system to evaluate and quantify the Company's loan portfolio with respect to quality and risk. The system focuses on, among other things, financial strength of borrowers, experience and depth of borrower's management, primary and secondary sources of repayment, payment history, nature of the business, and outlook on particular industries. The internal grading system enables the Company to monitor the quality of the entire loan portfolio on a consistent basis and provide management with an early warning system, enabling recognition and response to problem loans and potential problem loans. |
|
Commercial Grading System |
For commercial and agricultural loans, the Company uses a grading system that relies on quantifiable and measurable characteristics when available. This would include comparison of financial strength to available industry averages, comparison of transaction factors (loan terms and conditions) to loan policy, and comparison of credit history to stated repayment terms and industry averages. Some grading factors are necessarily more subjective such as economic and industry factors, regulatory environment, and management. Classified commercial loans consist of loans graded substandard and below. The grading system for commercial and agricultural loans is as follows: |
|
| ● | Doubtful | | | | | | | | | | | | | | | | | | | | | | | | | | |
A doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as a loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information. Nonaccrual treatment is required for doubtful assets because of the high probability of loss. |
|
| ● | Substandard | | | | | | | | | | | | | | | | | | | | | | | | | | |
Substandard loans have a high probability of payment default, or they have other well-defined weaknesses. They require more intensive supervision by bank management. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. For some Substandard loans, the likelihood of full collection of interest and principal may be in doubt and those loans should be placed on nonaccrual. Although Substandard assets in the aggregate will have a distinct potential for loss, an individual asset's loss potential does not have to be distinct for the asset to be rated Substandard. |
|
| ● | Special Mention | | | | | | | | | | | | | | | | | | | | | | | | | | |
Special Mention loans have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company's position at some future date. These loans pose elevated risk, but their weakness does not yet justify a Substandard classification. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or may be struggling with an ill-proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a Special Mention rating. Although a Special Mention loan has a higher probability of default than a pass asset, its default is not imminent. |
|
| ● | Pass | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans graded as Pass encompass all loans not graded as Doubtful, Substandard, or Special Mention. Pass loans are in compliance with loan covenants, and payments are generally made as agreed. Pass loans range from superior quality to fair quality. |
|
Business Banking Grading System |
Business banking loans are graded as either Classified or Non-classified: |
| ● | Classified | | | | | | | | | | | | | | | | | | | | | | | | | | |
Classified loans are inadequately protected by the current worth and paying capacity of the obligor or, if applicable, the collateral pledged. These loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt, or in some cases make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Classified loans have a high probability of payment default, or a high probability of total or substantial loss. These loans require more intensive supervision by management and are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants. When the likelihood of full collection of interest and principal may be in doubt; classified loans are considered to have a nonaccrual status. In some cases, Classified loans are considered uncollectible and of such little value that their continuance as assets is not warranted. |
|
| ● | Non-classified | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans graded as Non-classified encompass all loans not graded as Classified. Non-classified loans are in compliance with loan covenants, and payments are generally made as agreed and it is expected that such timely payments of principal and interest will continue. |
|
Consumer and Residential Mortgage Grading System |
Consumer and Residential Mortgage loans are graded as either Performing or Nonperforming. Nonperforming loans are loans that are 1) over 90 days past due and interest is still accruing, 2) on nonaccrual status or 3) restructured. All loans not meeting any of these three criteria are considered Performing. |
|
The following tables illustrate the Company's credit quality by loan class as of March 31, 2015 and December 31, 2014: |
|
Credit Quality Indicators |
As of March 31, 2015 |
|
ORIGINATED | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Credit Exposure | | Commercial | | | Commercial | | | Agricultural | | | Agricultural | | | Total | | | | | | | | | |
By Internally Assigned Grade: | Real Estate | Real Estate | | | | | | | | |
Pass | | $ | 584,916 | | | $ | 1,036,469 | | | $ | 29,781 | | | $ | 22,916 | | | $ | 1,674,082 | | | | | | | | | |
Special Mention | | | 15,872 | | | | 19,820 | | | | 117 | | | | 3 | | | | 35,812 | | | | | | | | | |
Substandard | | | 20,725 | | | | 26,330 | | | | 2,103 | | | | 1,612 | | | | 50,770 | | | | | | | | | |
Doubtful | | | - | | | | - | | | | 8 | | | | - | | | | 8 | | | | | | | | | |
Total | | $ | 621,513 | | | $ | 1,082,619 | | | $ | 32,009 | | | $ | 24,531 | | | $ | 1,760,672 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Business Banking Credit Exposure | | Business | | | | | | | | | | | | | | | Total | | | | | | | | | |
By Internally Assigned Grade: | Banking | | | | | | | | |
Non-classified | | $ | 379,306 | | | | | | | | | | | | | | | $ | 379,306 | | | | | | | | | |
Classified | | | 19,084 | | | | | | | | | | | | | | | | 19,084 | | | | | | | | | |
Total | | $ | 398,390 | | | | | | | | | | | | | | | $ | 398,390 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Credit Exposure | | Indirect | | | Home Equity | | | Direct | | | | | | | Total | | | | | | | | | |
By Payment Activity: | | | | | | | | |
Performing | | $ | 1,341,795 | | | $ | 474,651 | | | $ | 53,428 | | | | | | | $ | 1,869,874 | | | | | | | | | |
Nonperforming | | | 3,778 | | | | 6,644 | | | | 152 | | | | | | | | 10,574 | | | | | | | | | |
Total | | $ | 1,345,573 | | | $ | 481,295 | | | $ | 53,580 | | | | | | | $ | 1,880,448 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential Mortgage Credit Exposure | | Residential Mortgage | | | | | | | | | | | | | | | Total | | | | | | | | | |
By Payment Activity: | | | | | | | | |
Performing | | $ | 856,970 | | | | | | | | | | | | | | | $ | 856,970 | | | | | | | | | |
Nonperforming | | | 7,773 | | | | | | | | | | | | | | | | 7,773 | | | | | | | | | |
Total | | $ | 864,743 | | | | | | | | | | | | | | | $ | 864,743 | | | | | | | | | |
|
|
Credit Quality Indicators |
As of March 31, 2015 |
|
ACQUIRED | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Credit Exposure By Internally Assigned Grade: | | Commercial | | | Commercial | | | | | | Total | | | | | | | | | | | | | |
Real Estate | | | | | | | | | | | | |
Pass | | $ | 64,904 | | | $ | 181,277 | | | | | | | $ | 246,181 | | | | | | | | | | | | | |
Special Mention | | | 2,662 | | | | 2,620 | | | | | | | | 5,282 | | | | | | | | | | | | | |
Substandard | | | 5,003 | | | | 13,868 | | | | | | | | 18,871 | | | | | | | | | | | | | |
Total | | $ | 72,569 | | | $ | 197,765 | | | | | | | $ | 270,334 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Business Banking Credit Exposure By Internally Assigned Grade: | | Business | | | | | | | | | | | Total | | | | | | | | | | | | | |
Banking | | | | | | | | | | | | |
Non-classified | | $ | 50,222 | | | | | | | | | | | $ | 50,222 | | | | | | | | | | | | | |
Classified | | | 4,682 | | | | | | | | | | | | 4,682 | | | | | | | | | | | | | |
Total | | $ | 54,904 | | | | | | | | | | | $ | 54,904 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Credit Exposure By Payment Activity: | | Indirect | | | Home Equity | | | Direct | | | Total | | | | | | | | | | | | | |
Performing | | $ | 53,964 | | | $ | 73,291 | | | $ | 4,778 | | | $ | 132,033 | | | | | | | | | | | | | |
Nonperforming | | | 183 | | | | 427 | | | | 32 | | | | 642 | | | | | | | | | | | | | |
Total | | $ | 54,147 | | | $ | 73,718 | | | $ | 4,810 | | | $ | 132,675 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential Mortgage Credit Exposure By Payment Activity: | | Residential Mortgage | | | | | | | | | | | Total | | | | | | | | | | | | | |
Performing | | $ | 257,756 | | | | | | | | | | | $ | 257,756 | | | | | | | | | | | | | |
Nonperforming | | | 3,101 | | | | | | | | | | | | 3,101 | | | | | | | | | | | | | |
Total | | $ | 260,857 | | | | | | | | | | | $ | 260,857 | | | | | | | | | | | | | |
|
Credit Quality Indicators |
As of December 31, 2014 |
|
ORIGINATED | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Credit Exposure By Internally Assigned Grade: | | Commercial | | | Commercial | | | Agricultural | | | Agricultural | | | Total | | | | | | | | | |
Real Estate | Real Estate | | | | | | | | |
Pass | | $ | 570,884 | | | $ | 1,023,856 | | | $ | 30,481 | | | $ | 23,443 | | | $ | 1,648,664 | | | | | | | | | |
Special Mention | | | 6,022 | | | | 17,341 | | | | 275 | | | | 42 | | | | 23,680 | | | | | | | | | |
Substandard | | | 38,241 | | | | 27,671 | | | | 2,183 | | | | 1,489 | | | | 69,584 | | | | | | | | | |
Doubtful | | | - | | | | - | | | | 8 | | | | - | | | | 8 | | | | | | | | | |
Total | | $ | 615,147 | | | $ | 1,068,868 | | | $ | 32,947 | | | $ | 24,974 | | | $ | 1,741,936 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Business Banking Credit Exposure By Internally Assigned Grade: | | Business | | | | | | | | | | | | | | | Total | | | | | | | | | |
Banking | | | | | | | | |
Non-classified | | $ | 379,445 | | | | | | | | | | | | | | | $ | 379,445 | | | | | | | | | |
Classified | | | 18,990 | | | | | | | | | | | | | | | | 18,990 | | | | | | | | | |
Total | | $ | 398,435 | | | | | | | | | | | | | | | $ | 398,435 | | | | | | | | | |
Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Credit Exposure By Payment Activity: | | Indirect | | | Home Equity | | | Direct | | | | | | | Total | | | | | | | | | |
Performing | | $ | 1,306,095 | | | $ | 485,463 | | | $ | 55,658 | | | | | | | $ | 1,847,216 | | | | | | | | | |
Nonperforming | | | 3,955 | | | | 7,417 | | | | 136 | | | | | | | | 11,508 | | | | | | | | | |
Total | | $ | 1,310,050 | | | $ | 492,880 | | | $ | 55,794 | | | | | | | $ | 1,858,724 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential Mortgage Credit Exposure By Payment Activity: | | Residential Mortgage | | | | | | | | | | | | | | | Total | | | | | | | | | |
Performing | | $ | 838,816 | | | | | | | | | | | | | | | $ | 838,816 | | | | | | | | | |
Nonperforming | | | 10,026 | | | | | | | | | | | | | | | | 10,026 | | | | | | | | | |
Total | | $ | 848,842 | | | | | | | | | | | | | | | $ | 848,842 | | | | | | | | | |
|
|
Credit Quality Indicators |
As of December 31, 2014 |
|
ACQUIRED | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial Credit Exposure By Internally Assigned Grade: | | Commercial | | | Commercial | | | | | | Total | | | | | | | | | | | | | |
Real Estate | | | | | | | | | | | | |
Pass | | $ | 63,630 | | | $ | 186,036 | | | | | | | $ | 249,666 | | | | | | | | | | | | | |
Special Mention | | | 2,840 | | | | 2,646 | | | | | | | | 5,486 | | | | | | | | | | | | | |
Substandard | | | 8,794 | | | | 11,206 | | | | | | | | 20,000 | | | | | | | | | | | | | |
Total | | $ | 75,264 | | | $ | 199,888 | | | | | | | $ | 275,152 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Business Banking Credit Exposure By Internally Assigned Grade: | | Business | | | | | | | | | | | Total | | | | | | | | | | | | | |
Banking | | | | | | | | | | | | |
Non-classified | | $ | 53,264 | | | | | | | | | | | $ | 53,264 | | | | | | | | | | | | | |
Classified | | | 4,915 | | | | | | | | | | | | 4,915 | | | | | | | | | | | | | |
Total | | $ | 58,179 | | | | | | | | | | | $ | 58,179 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consumer Credit Exposure By Payment Activity: | | Indirect | | | Home Equity | | | Direct | | | Total | | | | | | | | | | | | | |
Performing | | $ | 65,063 | | | $ | 76,154 | | | $ | 5,277 | | | $ | 146,494 | | | | | | | | | | | | | |
Nonperforming | | | 160 | | | | 562 | | | | 40 | | | | 762 | | | | | | | | | | | | | |
Total | | $ | 65,223 | | | $ | 76,716 | | | $ | 5,317 | | | $ | 147,256 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential Mortgage Credit Exposure By Payment Activity: | | Residential Mortgage | | | | | | | | | | | Total | | | | | | | | | | | | | |
Performing | | $ | 262,883 | | | | | | | | | | | $ | 262,883 | | | | | | | | | | | | | |
Nonperforming | | | 3,864 | | | | | | | | | | | | 3,864 | | | | | | | | | | | | | |
Total | | $ | 266,747 | | | | | | | | | | | $ | 266,747 | | | | | | | | | | | | | |
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Troubled Debt Restructured Loans |
The Company's loan portfolio includes certain loans that have been modified where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company's loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower's sustained repayment performance for a reasonable period, generally six months. Substantially all of these modifications included one or a combination of the following: an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; temporary reduction in the interest rate; or change in scheduled payment amount. |
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When the Company modifies a loan, management evaluates any possible impairment based on the present value of the expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan 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 is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. |
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TDRs that occurred during the three month period ending March 31, 2015 consisted of five home equity loans totaling $0.1 million, fifteen direct consumer loans totaling $1.2 million, and nine residential real estate mortgages totaling $0.8 million. For all such modifications, the pre and post outstanding recorded investment amount remained substantially unchanged. During the three month period ending March 31, 2015 there was one default on a home equity loan TDR totaling $8,000 and four defaults on direct loans TDR totaling $0.2 million. |
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TDRs that occurred during the three month period ending March 31, 2014 consisted of twenty-two home equity loans totaling $1.1 million and twelve residential real estate mortgages totaling $1.0 million. For all such modifications, the pre and post outstanding recorded investment amount remained unchanged. During the three month period ending March 31, 2014 there was one default on a home equity loan TDR totaling $11,000 and one default on a residential real estate mortgage totaling $0.1 million. |