Loans and Allowance for Loan and Lease Losses | (8) Loans and Allowance for Loan and Lease Losses The classes of the loan portfolio, summarized by the aggregate pass rating, net of deferred fees and costs of ( $178,000 ) and ( $194,000 ) as of December 31, 2014 and 2014, respectively, and the classified ratings of special mention, substandard, and doubtful within Mid Penn’s internal risk rating system as of December 31, 2015 and 2014 are noted below: (Dollars in thousands) December 31, 2015 Pass Special Mention Substandard Doubtful Total Commercial and industrial $ 158,302 $ 1,289 $ 670 $ - $ 160,261 Commercial real estate 359,859 2,088 7,517 - 369,464 Commercial real estate - construction 65,665 2,403 - - 68,068 Lease financing 727 - - - 727 Residential mortgage 101,507 475 1,361 - 103,343 Home equity 32,928 261 222 - 33,411 Consumer 3,917 - - - 3,917 $ 722,905 $ 6,516 $ 9,770 $ - $ 739,191 (Dollars in thousands) December 31, 2014 Pass Special Mention Substandard Doubtful Total Commercial and industrial $ 117,166 $ 654 $ 1,190 $ - $ 119,010 Commercial real estate 280,817 4,859 11,681 - 297,357 Commercial real estate - construction 55,834 242 - - 56,076 Lease financing 1,121 - - - 1,121 Residential mortgage 64,900 252 1,290 - 66,442 Home equity 28,167 138 201 - 28,506 Consumer 3,021 - - - 3,021 $ 551,026 $ 6,145 $ 14,362 $ - $ 571,533 Impaired loans by loan portfolio class as of December 31, 2015 and 2014 are summarized as follows: December 31, 2015 December 31, 2014 (Dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance With no related allowance recorded: Commercial and industrial: Commercial and industrial $ 14 $ 49 $ - $ 395 $ 430 $ - Commercial real estate: Commercial real estate 1,023 2,020 - 1,971 4,481 - Acquired with credit deterioration* 931 - - - - - Residential mortgage: Residential mortgage 1,329 1,434 - 1,146 1,286 - Acquired with credit deterioration* 400 - - - - - Home equity: Home equity 115 137 - 29 88 - With an allowance recorded: Commercial and industrial $ 113 $ 128 $ 51 $ 223 $ 231 $ 137 Commercial real estate 1,947 1,981 429 6,954 7,255 1,382 Residential mortgage 32 32 23 - - - Home equity - - - 211 213 115 Total: Commercial and industrial $ 127 $ 177 $ 51 $ 618 $ 661 $ 137 Commercial real estate 3,901 4,001 429 8,925 11,736 1,382 Residential mortgage 1,761 1,466 23 1,146 1,286 - Home equity 115 137 - 240 301 115 * Loans acquired with credit deterioration are presented net of credit fair value adjustment. Average recorded investment of impaired loans and related interest income recognized for the years ended December 31, 2015, 2014, and 2013 are summarized as follows: December 31, 2015 December 31, 2014 December 31, 2013 (Dollars in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial and industrial: Commercial and industrial $ 19 $ - $ 72 $ - $ 188 $ - Acquired with credit deterioration - 205 - - - - Commercial real estate: Commercial real estate 1,051 14 1,966 346 2,506 187 Acquired with credit deterioration 926 350 - - - - Residential mortgage: Residential mortgage 816 8 541 - 299 - Acquired with credit deterioration 400 - - - - - Home equity: Home equity 107 - 29 - 31 - Acquired with credit deterioration - 3 - - - - With an allowance recorded: Commercial and industrial $ 123 $ - $ 93 $ - $ 51 $ - Commercial real estate 1,721 - 6,823 - 4,349 - Residential mortgage 25 - - - 13 - Home equity - - 76 - 54 - Total: Commercial and industrial $ 142 $ 205 $ 165 $ - $ 239 $ - Commercial real estate 3,698 364 8,789 346 6,855 187 Residential mortgage 1,241 8 541 - 312 - Home equity 107 3 105 - 85 - Nonaccrual loans by loan portfolio class as of December 31, 2015 and 2014 are summarized as follows: (Dollars in thousands) 2015 2014 Commercial and industrial $ 66 $ 267 Commercial real estate 2,607 7,249 Residential mortgage 1,630 1,152 Home equity 115 239 $ 4,418 $ 8,907 If nonaccrual loans and leases had been current in accordance with their original terms and had been outstanding throughout the period or since origination, if held for part of the period, Mid Penn would have recorded interest income on these loans of $ 778,000 , $ 798,000 , and $ 861,000 , in the years ended December 31, 2015, 2014, and 2013, respectively. Mid Penn has no commitments to lend additional funds to borrowers with impaired or nonaccrual loans. The performance and credit quality of the loan portfolio is also monitored by the analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The classes of the loan portfolio summarized by the past due status as of December 31, 2015 and 2014 are summarized as follows: (Dollars in thousands) December 31, 2015 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Total Past Due Current Total Loans Loans Receivable > 90 Days and Accruing Commercial and industrial: Commercial and industrial $ 55 $ 204 $ 66 $ 325 $ 159,936 $ 160,261 $ - Commercial real estate: Commercial real estate 211 608 1,456 2,275 366,263 368,538 - Acquired with credit deterioration 215 518 55 788 138 926 55 Commercial real estate - construction: Commercial real estate - construction - - - - 68,068 68,068 - Lease financing: Lease financing - - - - 727 727 - Residential mortgage: Residential mortgage 694 550 778 2,022 100,921 102,943 - Acquired with credit deterioration 12 - 222 234 166 400 - Home equity: Home equity - 50 23 73 33,338 33,411 - Consumer: Consumer 10 5 - 15 3,902 3,917 - Total $ 1,197 $ 1,935 $ 2,600 $ 5,732 $ 733,459 $ 739,191 $ 55 (Dollars in thousands) December 31, 2014 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Total Past Due Current Total Loans Loans Receivable > 90 Days and Accruing Commercial and industrial $ 172 $ 290 $ 87 $ 549 $ 118,461 $ 119,010 $ - Commercial real estate 403 197 6,585 7,185 290,172 297,357 - Commercial real estate - construction - - - - 56,076 56,076 - Lease financing - - - - 1,121 1,121 - Residential mortgage 328 82 1,117 1,527 64,915 66,442 - Home equity 93 63 157 313 28,193 28,506 - Consumer 6 - - 6 3,015 3,021 - Total $ 1,002 $ 632 $ 7,946 $ 9,580 $ 561,953 $ 571,533 $ - Activity in the allowance for loan and lease losses and recorded investment in loans receivable for the years ended December 31, 2015, 2014, and 2013, and as of December 31, 2015, 2014, and 2013 are as follows: (Dollars in thousands) December 31, 2015 Commercial and industrial Commercial real estate Commercial real estate - construction Lease financing Residential mortgage Home equity Consumer Unallocated Total Allowance for loan and lease losses: Beginning balance $ 1,393 $ 3,925 $ 33 $ 2 $ 450 $ 653 $ 35 $ 225 $ 6,716 Charge-offs (130) (1,569) - - (35) (36) (14) - (1,784) Recoveries 12 75 - - 44 29 11 - 171 Provisions 118 1,121 120 (1) 75 (329) (20) (19) 1,065 Ending balance $ 1,393 $ 3,552 $ 153 $ 1 $ 534 $ 317 $ 12 $ 206 $ 6,168 Ending balance: individually evaluated for impairment $ 51 $ 429 $ - $ - $ 23 $ - $ - $ - $ 503 Ending balance: collectively evaluated for impairment $ 1,342 $ 3,123 $ 153 $ 1 $ 511 $ 317 $ 12 $ 206 $ 5,665 Loans receivable: Ending balance $ 160,261 $ 369,464 $ 68,068 $ 727 $ 103,343 $ 33,411 $ 3,917 $ - $ 739,191 Ending balance: individually evaluated for impairment $ 127 $ 2,970 $ - $ - $ 1,361 $ 115 $ - $ - $ 4,573 Ending balance: collectively evaluated for impairment $ 160,134 $ 365,563 $ 68,068 $ 727 $ 101,582 $ 33,296 $ 3,917 $ - $ 733,287 Ending balance: acquired with credit deterioration $ - $ 931 $ - $ - $ 400 $ - $ - $ - $ 1,331 (Dollars in thousands) December 31, 2014 Commercial and industrial Commercial real estate Commercial real estate - construction Lease financing Residential mortgage Home equity Consumer Unallocated Total Allowance for loan and lease losses: Beginning Balance $ 1,187 $ 4,006 $ 9 $ - $ 581 $ 441 $ 72 $ 21 $ 6,317 Charge-offs (62) (1,057) - - (133) (43) (33) - (1,328) Recoveries 13 13 - - 20 1 63 - 110 Provisions 255 963 24 2 (18) 254 (67) 204 1,617 Ending balance $ 1,393 $ 3,925 $ 33 $ 2 $ 450 $ 653 $ 35 $ 225 $ 6,716 Ending balance: individually evaluated for impairment $ 137 $ 1,382 $ - $ - $ - $ 115 $ - $ - $ 1,634 Ending balance: collectively evaluated for impairment $ 1,256 $ 2,543 $ 33 $ 2 $ 450 $ 538 $ 35 $ 225 $ 5,082 Loans receivable: Ending balance $ 119,010 $ 297,357 $ 56,076 $ 1,121 $ 66,442 $ 28,506 $ 3,021 $ - $ 571,533 Ending balance: individually evaluated for impairment $ 618 $ 8,925 $ - $ - $ 1,146 240 $ - $ - $ 10,929 Ending balance: collectively evaluated for impairment $ 118,392 $ 288,432 $ 56,076 $ 1,121 $ 65,296 $ 28,266 $ 3,021 $ - $ 560,604 (Dollars in thousands) December 31, 2013 Commercial and industrial Commercial real estate Commercial real estate - construction Lease financing Residential mortgage Home equity Consumer Unallocated Total Allowance for loan and lease losses: Beginning Balance $ 1,298 $ 3,112 $ 64 $ 1 $ 581 $ 343 $ 101 $ 9 $ 5,509 Charge-offs (183) (919) (17) - (167) (91) (96) - (1,473) Recoveries 193 279 7 2 23 8 84 - 596 Provisions (121) 1,534 (45) (3) 144 181 (17) 12 1,685 Ending balance $ 1,187 $ 4,006 $ 9 $ - $ 581 $ 441 $ 72 $ 21 $ 6,317 Ending balance: individually evaluated for impairment $ 42 $ 1,860 $ - $ - $ 25 $ 6 $ - $ - $ 1,933 Ending balance: collectively evaluated for impairment $ 1,145 $ 2,146 $ 9 $ - $ 556 $ 435 $ 72 $ 21 $ 4,384 Loans receivable: Ending balance $ 105,844 $ 292,774 $ 45,647 $ 1,356 $ 69,830 $ 26,321 $ 4,690 $ - $ 546,462 Ending balance: individually evaluated for impairment $ 300 $ 10,245 $ - $ - $ 291 76 $ - $ - $ 10,912 Ending balance: collectively evaluated for impairment $ 105,544 $ 282,529 $ 45,647 $ 1,356 $ 69,539 $ 26,245 $ 4,690 $ - $ 535,550 The recorded investments in troubled debt restructured loans at December 31, 2015 and 2014 are as follows: (Dollars in thousands) Pre-Modification Post-Modification December 31, 2015 Outstanding Recorded Investment Outstanding Recorded Investment Recorded Investment Commercial and industrial $ 40 $ 35 $ 15 Commercial real estate 3,634 3,117 2,235 Residential mortgage 733 727 555 $ 4,407 $ 3,879 $ 2,805 (Dollars in thousands) Pre-Modification Post-Modification December 31, 2014 Outstanding Recorded Investment Outstanding Recorded Investment Recorded Investment Commercial and industrial $ 40 $ 35 $ 23 Commercial real estate 11,189 9,443 8,005 Residential mortgage 903 897 713 Home equity 50 7 5 $ 12,182 $ 10,382 $ 8,746 At December 31, 2015, Mid Penn’s troubled debt restructured loans totaled $2,805,000 , of which four loans totaling $459,000 , represented accruing impaired loans in compliance with the terms of the modification. Of the $459,000, three are accruing impaired residential mortgages to unrelated borrowers totaling $64,000 and the other one is an accruing impaired commercial real estate loan for $395,000 . The remaining $2,346,000 , representing nine loans among four relationships, are nonaccrual impaired loans, and resulted in a collateral evaluation in accordance with the guidance on impaired loans. One large relationship accounts for $1,370,000 of the $2,346,000 nonaccrual impaired troubled debt restructured loan total. As a result of the evaluation, a specific allocation and, subsequently, charge-offs have been taken as appropriate. As of December 31, 2015, there were no charge-offs associated with troubled debt restructured loans while under a forbearance agreement. As of December 31, 2015, there were no defaulted troubled debt restructured loans as all troubled debt restructured loans were current with respect to their associated forbearance agreements. There were also no defaults on troubled debt restructured loans within twelve months of restructure during 2015. One forbearance agreement was negotiated during 2008, nine forbearance agreements were negotiated during 2009, two were negotiated during 2013, and one was negotiated during 2014. At December 31, 2014, Mid Penn’s troubled debt restructured loans totaled $8,746,000 , of which six loans totaling $2,035,000 , represented accruing impaired loans in compliance with the terms of the modification. Of the $2,035,000, three are accruing impaired residential mortgages to unrelated borrowers totaling $71,000 and the other three are accruing impaired commercial real estate loans spread among two relationships totaling $1,964,000 . The remaining $6,711,000 , representing fourteen loans among nine relationships, are nonaccrual impaired loans, and resulted in a collateral evaluation in accordance with the guidance on impaired loans. Two large relationships account for $4,680,000 of the $6,711,000 nonaccrual impaired troubled debt restructured loan total. As a result of the evaluation, a specific allocation and, subsequently, charge-offs have been taken as appropriate. As of December 31, 2014, charge-offs associated with troubled debt restructured loans while under forbearance agreement totaled $87,000 . As of December 31, 2014, there were no defaulted troubled debt restructured loans as all troubled debt restructured loans were current with respect to their associated forbearance agreements. There were also no defaults on troubled debt restructured loans within twelve months of restructure during 2014. One forbearance agreement was negotiated during 2008 , ten forbearance agreements were negotiated during 2009 , one was negotiated during 2010 , four were negotiated during 2013 , and four were negotiated during 2014 . Mid Penn entered into forbearance agreements on all loans currently classified as troubled debt restructures and all of these agreements have resulted in additional principal repayment. The terms of these forbearance agreements vary whereby principal payments have been decreased, interest rates have been reduced and/or the loan will be repaid as collateral is sold. There were no loans modified in 2015 and four loans modified in 2014 that resulted in troubled debt restructurings. The following table summarizes the loans whose terms have been modified resulting in troubled debt restructurings during the year ended December 31, 2014. (Dollars in thousands) Pre-Modification Post-Modification December 31, 2014 Number of Contracts Outstanding Recorded Investment Outstanding Recorded Investment Recorded Investment Commercial real estate 2 $ 1,057 $ 757 $ 734 Residential mortgage 1 540 540 520 Home equity 1 50 7 5 4 $ 1,647 $ 1,304 $ 1,259 The following table provides activity for the accretable yield of purchased impaired loans for the year ended December 31, 2015. (Dollars in thousands) Accretable yield, January 1, 2015 $ - Acquisition of impaired loans 458 Accretable yield amortized to interest income (280) Accretable yield, December 31, 2015 $ 178 The Bank has granted loans to certain of its executive officers, directors, and their related interests. The aggregate amount of these loans was $ 10,657,000 and $ 6,559,000 at December 31, 2015 and 2014, respectively. $2,096,000 of this increase is from the addition of Phoenix’s related party loans. During 2015, $ 5,441,000 of new loans and advances were extended and repayments totaled $ 3,440,000 . None of these loans were past due, in nonaccrual status, or restructured at December 31, 2015. |