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Loans
 6 Months Ended
Jun. 30, 2012
Loans [Abstract]  
LOANS

5.    LOANS

Total net loans at June 30, 2012 and December 31, 2011 are summarized as follows:

 

                 
     June 30,
2012		     December 31,
2011		  
     

Commercial, industrial, and agricultural

   $ 266,122     $ 253,324  

Commercial mortgages

     260,788       242,511  

Residential real estate

     325,200       298,628  

Consumer

     54,251       54,677  

Credit cards

     3,239       3,206  

Overdrafts

     284       423  

Less: unearned discount

     (3,117 )      (2,886 ) 

          allowance for loan losses

     (13,690 )      (12,615 ) 
   

 

 

    

 

 

  
     

Loans, net

   $ 893,077     $ 837,268  
   

 

 

    

 

 

  

At June 30, 2012 and December 31, 2011, net unamortized loan costs and fees of $71 and ($7), 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. 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.

Transactions in the allowance for loan losses for the three months ended June 30, 2012 were as follows:

 

                                                         
     Commercial,
Industrial, and
Agricultural		     Commercial
Mortgages		     Residential
Real
Estate		     Consumer     Credit
Cards		     Overdrafts     Total  
               

Allowance for loan losses, April 1, 2012

   $ 4,942     $ 4,377     $ 1,997     $ 1,435     $ 96     $ 168     $ 13,015  

Charge-offs

     (422 )      (121 )      (137 )      (382 )      (14 )      (50 )      (1,126 ) 

Recoveries

     5       0       0       22       6       22       55  

Provision (benefit) for loan losses

     590       297       365       493       (7 )      8       1,746  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
               

Allowance for loan losses, June 30, 2012

   $ 5,115     $ 4,553     $ 2,225     $ 1,568     $ 81     $ 148     $ 13,690  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Transactions in the allowance for loan losses for the six months ended June 30, 2012 were as follows:

 

                                                         
     Commercial,
Industrial, and
Agricultural		     Commercial
Mortgages		     Residential
Real
Estate		     Consumer     Credit
Cards		     Overdrafts     Total  
               

Allowance for loan losses, January 1, 2012

   $ 4,511     $ 4,470     $ 1,991     $ 1,404     $ 71     $ 168     $ 12,615  

Charge-offs

     (647 )      (236 )      (224 )      (638 )      (33 )      (117 )      (1,895 ) 

Recoveries

     8       0       0       49       7       56       120  

Provision for loan losses

     1,243       319       458       753       36       41       2,850  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
               

Allowance for loan losses, June 30, 2012

   $ 5,115     $ 4,553     $ 2,225     $ 1,568     $ 81     $ 148     $ 13,690  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Transactions in the allowance for loan losses for the three months ended June 30, 2011 were as follows:

 

                                                         
     Commercial,
Industrial, and
Agricultural		     Commercial
Mortgages		     Residential
Real Estate		     Consumer     Credit
Cards		     Overdrafts     Total  
               

Allowance for loan losses, April 1, 2011

   $ 3,732     $ 3,879     $ 1,879     $ 1,507     $ 96     $ 131     $ 11,224  

Charge-offs

     (173 )      (41 )      (63 )      (202 )      (7 )      (62 )      (548 ) 

Recoveries

     3       0       0       21       3       20       47  

Provision (benefit) for loan losses

     208       561       84       74       12       53       992  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Allowance for loan losses, June 30, 2011

   $     3,770     $     4,399     $     1,900     $   1,400     $    104     $ 142     $   11,715  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Transactions in the allowance for loan losses for the six months ended June 30, 2011 were as follows:

 

                                                         
     Commercial,
Industrial, and
Agricultural		     Commercial
Mortgages		     Residential
Real Estate		     Consumer     Credit
Cards		     Overdrafts     Total  

Allowance for loan losses, January 1, 2011

   $ 3,517     $ 3,511     $ 1,916     $ 1,561     $ 96     $ 219     $ 10,820  

Charge-offs

     (215 )      (88 )      (77 )      (462 )      (25 )      (115 )      (982 ) 

Recoveries

     4       0       0       45       5       54       108  

Provision (benefit) for loan losses

     464       976       61       256       28       (16 )      1,769  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Allowance for loan losses, June 30, 2011

   $     3,770     $     4,399     $     1,900     $   1,400     $    104     $ 142     $   11,715  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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 June 30, 2012 and December 31, 2011:

 

                                                         
June 30, 2012   Commercial,
Industrial, and
Agricultural		     Commercial
Mortgages		     Residential
Real Estate		     Consumer     Credit
Cards		     Overdrafts     Total  

Allowance for loan losses:

                                                        

Ending allowance balance attributable to loans:

                                                        

Individually evaluated for impairment

   $ 1,282     $ 347     $ 55     $ 0     $ 0     $ 0     $ 1,684  

Collectively evaluated for impairment

     3,833       3,434       2,170       1,568       81       148       11,234  

Modified in a troubled debt restructuring

     0       772       0       0       0       0       772  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending allowance balance

   $ 5,115     $ 4,553     $ 2,225     $ 1,568     $ 81     $ 148     $ 13,690  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
               

Loans:

                                                        

Loans individually evaluated for impairment

   $ 7,778     $ 8,343     $ 628     $ 0     $ 0     $ 0     $ 16,749  

Loans collectively evaluated for impairment

     258,047       242,292       324,572       54,251       3,239       284       882,685  

Loans modified in a troubled debt restructuring

     297       10,153       0       0       0       0       10,450  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending loans balance

   $ 266,122     $ 260,788     $ 325,200     $ 54,251     $ 3,239     $  284     $ 909,884  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                         
December 31, 2011   Commercial,
Industrial, and
Agricultural		     Commercial
Mortgages		     Residential
Real Estate		     Consumer     Credit
Cards		     Overdrafts     Total  

Allowance for loan losses:

                                                        

Ending allowance balance attributable to loans:

                                                        

Individually evaluated for impairment

   $ 329     $ 917     $ 19     $ 0     $ 0     $ 0     $ 1,265  

Collectively evaluated for impairment

     4,182       3,325       1,972       1,404       71       168       11,122  

Modified in a troubled debt restructuring

     —         228       0       0       0       0       228  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending allowance balance

   $ 4,511     $ 4,470     $ 1,991     $ 1,404     $ 71     $ 168     $ 12,615  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
               

Loans:

                                                        

Loans individually evaluated for impairment

   $ 6,115     $ 8,457     $ 124     $ 0     $ 0     $ 0     $ 14,696  

Loans collectively evaluated for impairment

     247,209       226,366       298,504       54,677       3,206       423       830,385  

Loans modified in a troubled debt restructuring

     —         7,688       0       0       0       0       7,688  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending loans balance

   $ 253,324     $ 242,511     $ 298,628     $ 54,677     $ 3,206     $  423     $ 852,769  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following tables present information related to loans individually evaluated for impairment by portfolio segment as of June 30, 2012 and December 31, 2011 and for the three and six months ended June 30, 2012 and 2011:

 

                         
June 30, 2012   Unpaid Principal
Balance		     Recorded
Investment		     Allowance for Loan
Losses Allocated		  

With an allowance recorded:

                        

Commercial, industrial, and agricultural

   $ 6,636     $ 4,525     $ 1,282  

Commercial mortgage

     7,004       6,292       1,119  

Residential real estate

     598       492       55  

With no related allowance recorded:

                        

Commercial, industrial, and agricultural

     8,812       8,097       0  

Commercial mortgage

     9,558       7,657       0  

Residential real estate

     136       136       0  
   

 

 

    

 

 

    

 

 

  
       

Total

   $ 32,744     $ 27,199     $ 2,456  
   

 

 

    

 

 

    

 

 

  

 

                         
December 31, 2011   Unpaid Principal
Balance		     Recorded
Investment		     Allowance for Loan
Losses Allocated		  

With an allowance recorded:

                        

Commercial, industrial, and agricultural

   $ 4,329     $ 2,815     $ 462  

Commercial mortgage

     4,724       4,065       1,012  

Residential real estate

     187       124       19  

With no related allowance recorded:

                        

Commercial, industrial, and agricultural

     3,892       3,300       0  

Commercial mortgage

     13,839       12,080       0  

Residential real estate

     0       0       0  
   

 

 

    

 

 

    

 

 

  
       

Total

   $ 26,971     $ 22,384     $ 1,493  
   

 

 

    

 

 

    

 

 

  

 

                                                 
    Three Months Ended June 30, 2012     Six Months Ended June 30, 2012  
     Average
Recorded
Investment		     Interest
Income
Recognized		     Cash Basis
Interest
Recognized		     Average
Recorded
Investment		     Interest
Income
Recognized		     Cash Basis
Interest
Recognized		  

With an allowance recorded:

                                                

Commercial, industrial, and agricultural

   $ 3,528     $ 4     $ 4     $ 3,290     $ 4     $ 4  

Commercial mortgage

     6,031       0       0       5,376       0       0  

Residential real estate

     353       4       4       277       8       8  

With no related allowance recorded:

                                                

Commercial, industrial, and agricultural

     3,537       0       0       3,458       0       0  

Commercial mortgage

     12,123       0       0       12,108       0       0  

Residential real estate

     68       0       0       45       0       0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
             

Total

   $ 25,640     $ 8     $ 8     $ 24,554     $ 12     $ 12  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                 
    Three Months Ended June 30, 2011     Six Months Ended June 30, 2011  
     Average
Recorded
Investment		     Interest
Income
Recognized		     Cash Basis
Interest
Recognized		     Average
Recorded
Investment		     Interest
Income
Recognized		     Cash Basis
Interest
Recognized		  

With an allowance recorded:

                                                

Commercial, industrial, and agricultural

   $ 1,183     $ 0     $ 0     $ 1,660     $ 0     $ 0  

Commercial mortgage

     8,835       14       14       8,810       16       16  

Residential real estate

     185       0       0       202       0       0  

With no related allowance recorded:

                                                

Commercial, industrial, and agricultural

     2,411       0       0       1,607       0       0  

Commercial mortgage

     4,584       0       0       3,506       0       0  

Residential real estate

     0       0       0       0       0       0  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 17,198     $ 14     $ 14     $ 15,785     $ 16     $ 16  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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 June 30, 2012 and December 31, 2011:

 

                                 
    June 30, 2012     December 31, 2011  
    Nonaccrual     Past Due
Over 90 Days
Still on Accrual		     Nonaccrual     Past Due
Over 90 Days
Still on Accrual		  

Commercial, industrial, and agricultural

   $ 7,354     $ 0     $ 6,949     $ 10  

Commercial mortgages

     8,530       0       8,359       122  

Residential real estate

     2,221       82       1,254       157  

Consumer

     4       187       5       125  

Credit cards

     0       15       0       27  
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Total

   $ 18,109     $ 284     $ 16,567     $ 441  
   

 

 

    

 

 

    

 

 

    

 

 

  

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.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2012 and December 31, 2011 by class of loans. The recorded investment in loans excludes accrued interest and loan origination fees, net due to their insignificance.

 

                                                 
June 30, 2012   30-59 Days
Past Due		     60-89 Days
Past Due		     Greater Than
90 Days
Past Due		     Total
Past Due		     Loans Not
Past Due		     Total  
             

Commercial, industrial, and agricultural

   $ 246     $ 56     $ 4,946     $ 5,248     $ 260,874     $ 266,122  

Commercial mortgages

     813       422       8,530       9,765       251,023       260,788  

Residential real estate

     1,696       420       2,021       4,137       321,063       325,200  

Consumer

     587       132       191       910       53,341       54,251  

Credit cards

     11       28       15       54       3,185       3,239  

Overdrafts

     0       0       0       0       284       284  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
             

Total

   $ 3,353     $ 1,058     $ 15,703     $ 20,114     $ 889,770     $ 909,884  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                 
December 31, 2011   30-59 Days
Past Due		     60-89 Days
Past Due		     Greater Than
90 Days
Past Due		     Total Past
Due		     Loans Not
Past Due		     Total  

Commercial, industrial, and agricultural

   $ 239     $ 53     $ 6,959     $ 7,251     $ 246,073     $ 253,324  

Commercial mortgages

     1,064       2,620       7,043       10,727       231,784       242,511  

Residential real estate

     1,816       682       1,411       3,909       294,719       298,628  

Consumer

     392       185       130       707       53,970       54,677  

Credit cards

     34       19       27       80       3,126       3,206  

Overdrafts

     —         —         —         —         423       423  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
             

Total

   $ 3,545     $ 3,559     $ 15,570     $ 22,674     $ 830,095     $ 852,769  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Troubled Debt Restructurings

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.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. All loans modified in troubled debt restructurings are performing in accordance with their modified terms as of June 30, 2012 and no principal balances were forgiven in connection with the loan restructurings.

The Corporation has allocated $209 and $228 of specific reserves to one commercial mortgage customer whose loan terms have been modified in troubled debt restructurings as of June 30, 2012 and December 31, 2011, respectively. The interest rate on the original loan was 6.60%. Due to financial difficulties experienced by the customer, the interest rate was reduced to 4.19% in the third quarter of 2010 and further reduced to 4.07% in the third quarter of 2011. In the first quarter of 2012, the customer was granted interest-only terms for six months, resulting in an additional provision for loan losses that was insignificant for the three and six months ended June 30, 2012. This loan had a total recorded investment of $1,657 and $1,662 as of June 30, 2012 and December 31, 2011, respectively.

The Corporation has allocated $101 of specific reserves to one commercial mortgage customer with two loans whose terms have been modified in a troubled debt restructuring as of June 30, 2012. The interest rates on the original loans were 6.45% and 6.47%. Due to financial difficulties experienced by the customer, the interest rates on both loans were reduced to 5.75% in the first quarter of 2012, and the maturity dates were extended to 2020 and 2024, resulting in an additional provision for loan losses of $101 for the three and six months ended June 30, 2012. These loans had a total recorded investment of $1,832 as of June 30, 2012. This commercial customer has two additional mortgage loans that were deemed to be impaired as of December 31, 2011 and whose terms were modified in a troubled debt restructuring in the first quarter of 2012. The loan payments were modified to reflect a twenty year amortization with a balloon payment due after five years. These loans had a total recorded investment of $712 and $728 and specific reserves of $463 and $465 as of June 30, 2012 and December 31, 2011, respectively. No additional provision for loan losses was required to be recorded during the three and six months ended June 30, 2012 in connection with the loan modifications.

The Corporation has a commercial mortgage customer whose loan relationships have interest-only terms that were extended during 2011. The original interest rates on the loans, which were also the market rates of interest at the time of the loan modification, were not reduced; therefore, no additional provision for loan losses was required to be recorded. These loans have a total recorded investment of $4,547 and $4,588 at June 30, 2012 and December 31, 2011, respectively.

In addition, the Corporation has a commercial mortgage customer whose loan relationship was restructured due to the forgiveness of accrued interest and late charges. The original interest rate on the loan, which was also the market rate of interest at the time of the loan modification, was not reduced; therefore, no additional provision for loan losses was required to be recorded. This loan has a recorded investment of $1,405 and $1,438 at June 30, 2012 and December 31, 2011.

The Corporation has a commercial customer with five loans whose terms were modified in a troubled debt restructuring in the first quarter of 2012 due to financial difficulties experienced by the customer. The outstanding balances on the five loans, which ranged in maturity from 2012 to 2014, were combined into one new loan with a five year term. The blended original interest rates on the loans, which were also the market rates of interest at the time of the loan modification, were not reduced; therefore no additional provision for loan losses was required to be recorded. This loan has a total recorded investment of $297 at June 30, 2012.

 

The Corporation has no further loan commitments to customers whose loans are classified as a troubled debt restructuring, and there have been no payment defaults on loans modified in a troubled debt restructuring.

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. The Corporation analyzes loans individually by classifying the loans as to credit risk. Loans with an outstanding balance greater than $1 million are analyzed at least semi-annually and loans with an outstanding balance 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.

 

                                         
June 30, 2012   Pass     Special
Mention		     Substandard     Doubtful     Total  
           

Commercial, industrial, and agricultural

   $ 250,151     $ 1,566     $ 14,228     $ 177     $ 266,122  

Commercial mortgages

     236,706       1,385       21,985       712       260,788  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
           

Total

   $ 486,857     $ 2,951     $ 36,213     $ 889     $ 526,910  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                         
December 31, 2011   Pass     Special
Mention		     Substandard     Doubtful     Total  
           

Commercial, industrial, and agricultural

   $ 223,457     $ 4,176     $ 25,490     $ 201     $ 253,324  

Commercial mortgages

     214,098       3,172       24,513       728       242,511  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
           

Total

   $ 437,555     $ 7,348     $ 50,003     $ 929     $ 495,835  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

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 June 30, 2012 and December 31, 2011:

 

                 
     June 30,
2012		     December 31,
2011		  

Consumer

   $ 19,134     $ 18,176  

Residential real estate

     1,020       1,056  

Less: unearned discount

     (3,117 )      (2,886 ) 
   

 

 

    

 

 

  
     

Total

   $ 17,037     $ 16,346  
   

 

 

    

 

 

  

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 and consumer loans based on payment activity as of June 30, 2012 and December 31, 2011:

 

                                                 
    June 30, 2012     December 31, 2011  
     Residential
Real Estate		     Consumer     Credit
Cards		     Residential
Real Estate		     Consumer     Credit
Cards		  
             

Performing

   $ 322,897     $ 54,060     $ 3,224     $ 297,217     $ 54,547     $ 3,179  

Non-performing

     2,303       191       15       1,411       130       27  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
             

Total

   $ 325,200     $ 54,251     $ 3,239     $ 298,628     $ 54,677     $ 3,206