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Loans
 12 Months Ended
Dec. 31, 2012
Loans [Abstract]  
Loans

4.  Loans

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

 

                 
    2012     2011  
     

Commercial, industrial, and agricultural

   $ 257,091     $ 253,324  

Commercial mortgages

     261,791       242,511  

Residential real estate

     347,904       298,628  

Consumer

     58,668       53,471  

Credit cards

     4,800       4,412  

Overdrafts

     971       423  

Less: unearned discount

     (3,401 )      (2,886 ) 

allowance for loan losses

     (14,060 )      (12,615 ) 
   

 

 

    

 

 

  

    Loans, net

   $ 913,764     $ 837,268  
   

 

 

    

 

 

  

At December 31, 2012 net unamortized loan costs of $232 have been included in the carrying value of loans. As of December 31, 2011, net unamortized loan fees of $7 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 year ended December 31, 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

     (2,871 )      (401 )      (304 )      (1,279 )      (78 )      (257 )      (5,190 ) 

Recoveries

     45       -       1       91       18       99       254  

Provision for loan losses

     3,255       628       778       1,483       72       165       6,381  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Allowance for loan losses, December 31, 2012

   $ 4,940     $ 4,697     $ 2,466     $ 1,699     $ 83     $ 175     $ 14,060  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Transactions in the allowance for loan losses for the year ended December 31, 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

     (1,796 )      (175 )      (217 )      (907 )      (39 )      (222 )      (3,356 ) 

Recoveries

     9       -       13       88       10       94       214  

Provision for loan losses

     2,781       1,134       279       662       4       77       4,937  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Allowance for loan losses, December 31, 2011

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Transactions in the allowance for loan losses for the year ended December 31, 2010 were as follows:

 

         

Balance, beginning of year

   $ 9,795  

Charge-offs

     (4,371 ) 

Recoveries

     238  
   

 

 

  

Net charge-offs

     (4,133 ) 

Provision for loan losses

     5,158  
   

 

 

  

Balance, end of year

   $ 10,820  
   

 

 

  

 

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 December 31, 2012 and 2011:

 

                                                         
December 31, 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

   $ 541     $ 131     $ 81     $ -     $ -     $ -     $ 753  

Collectively evaluated for impairment

     4,399       3,467       2,385       1,699       83       175       12,208  

Modified in a troubled debt restructuring

     -       1,099       -       -       -       -       1,099  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending allowance balance

   $ 4,940     $ 4,697     $ 2,466     $ 1,699     $ 83     $ 175     $ 14,060  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans:

                                                        

Loans individually evaluated for impairment

   $ 2,623     $ 10,683     $ 593     $ -     $ -     $ -     $ 13,899  

Loans collectively evaluated for impairment

     253,048       240,907       347,311       58,668       4,800       971       905,705  

Loans modified in a troubled debt restructuring

     1,420       10,201       -       -       -       -       11,621  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending loans balance

   $ 257,091     $ 261,791     $ 347,904     $ 58,668     $ 4,800     $ 971     $ 931,225  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                         
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     $ -     $ -     $ -     $ 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       -       -       -       -       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     $ -     $ -     $ -     $ 14,696  

Loans collectively evaluated for impairment

     247,209       226,366       298,504       53,471       4,412       423       830,385  

Loans modified in a troubled debt restructuring

     -       7,688       -       -       -       -       7,688  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending loans balance

   $ 253,324     $ 242,511     $ 298,628     $ 53,471     $ 4,412     $ 423     $ 852,769  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The recorded investment in loans within the tables above and below excludes accrued interest receivable and unearned discount due to immateriality.

The following tables present information related to loans individually evaluated for impairment by portfolio segment as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011, and 2010:

 

                         
December 31, 2012  

Unpaid
Principal

Balance

    

Recorded

Investment

    

Allowance
for Loan

Losses
Allocated

  
       

With an allowance recorded:

                        

Commercial, industrial, and agricultural

   $ 2,542     $ 1,792     $ 541  

Commercial mortgage

     5,870       5,329       1,230  

Residential real estate

     416       381       81  

With no related allowance recorded:

                        

Commercial, industrial, and agricultural

     2,804       2,251       -  

Commercial mortgage

     17,285       15,555       -  

Residential real estate

     308       212       -  
   

 

 

    

 

 

    

 

 

  

Total

   $ 29,225     $ 25,520     $ 1,852  
   

 

 

    

 

 

    

 

 

  

With an allowance recorded:

                        

Commercial, industrial, and agricultural

   $ 4,329     $ 2,815     $ 329  

Commercial mortgage

     4,724       4,065       1,145  

Residential real estate

     187       124       19  

With no related allowance recorded:

                        

Commercial, industrial, and agricultural

     3,892       3,300       -  

Commercial mortgage

     13,839       12,080       -  

Residential real estate

     -       -       -  
   

 

 

    

 

 

    

 

 

  

Total

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

 

 

    

 

 

    

 

 

  

The unpaid principal balance of impaired loans includes the Corporation’s recorded investment in the loan and amounts that have been charged off.

 

                         
   

Year Ended

December 31, 2012

  
   

Average

Recorded

Investment

    

Interest

Income

Recognized

    

Cash Basis

Interest

Recognized

  
       
       

With an allowance recorded:

                        

Commercial, industrial, and agricultural

   $ 3,083     $ 4     $ 4  

Commercial mortgage

     5,504       3       3  

Residential real estate

     334       13       13  

With no related allowance recorded:

                        

Commercial, industrial, and agricultural

     3,217       -       -  

Commercial mortgage

     12,723       -       -  

Residential real estate

     103       -       -  
   

 

 

    

 

 

    

 

 

  

Total

   $ 24,964     $ 20     $ 20  
   

 

 

    

 

 

    

 

 

  

 

                         
   

Year Ended

December 31, 2011

  
   

Average

Recorded

Investment

    

Interest

Income

Recognized

    

Cash Basis

Interest

Recognized

  
       
       

With an allowance recorded:

                        

Commercial, industrial, and agricultural

   $ 3,711     $ 3     $ 3  

Commercial mortgage

     6,412       19       19  

Residential real estate

     179       4       4  

With no related allowance recorded:

                        

Commercial, industrial, and agricultural

     2,050       -       -  

Commercial mortgage

     6,040       -       -  

Residential real estate

     -       -       -  
   

 

 

    

 

 

    

 

 

  

Total

   $ 18,392     $ 26     $ 26  
   

 

 

    

 

 

    

 

 

  

 

         
   

Year ended December 31, 2010

  

Average recorded investment in impaired loans

   $ 12,106  

Interest income recognized during impairment

     383  

Cash-basis interest income recognized

     383  

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still on accrual by class of loans as of December 31, 2012 and 2011:

 

                                 
   

December 31, 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

   $ 3,073     $ -     $ 6,949     $ 10  

Commercial mortgages

     8,570       109       8,359       122  

Residential real estate

     2,792       18       1,254       157  

Consumer

     10       217       5       125  

Credit cards

     -       13       -       27  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 14,445     $ 357     $ 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 December 31, 2012 and 2011 by class of loans.

 

                                                 
December 31, 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

   $ 724     $ 157     $ 2,968     $ 3,849     $ 253,242     $ 257,091  

Commercial mortgages

     1,162       3,197       8,679       13,038       248,753       261,791  

Residential real estate

     1,390       641       2,700       4,731       343,173       347,904  

Consumer

     724       203       227       1,154       57,514       58,668  

Credit cards

     39       9       13       61       4,739       4,800  

Overdrafts

     -       -       -       -       971       971  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 4,039     $ 4,207     $ 14,587     $ 22,833     $ 908,392     $ 931,225  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2011

                                                

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       52,764       53,471  

Credit cards

     34       19       27       80       4,332       4,412  

Overdrafts

     -       -       -       -       423       423  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Troubled Debt Restructurings

During the years ended December 31, 2012 and 2011, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included either or both of the following: a reduction of the stated interest rate of the loan; or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk.

The following table presents the number of loans, loan balances, and specific reserves for loans that have been restructured in a troubled debt restructuring as of December 31, 2012 and December 31, 2011.

 

                                                 
   

December 31, 2012

    

December 31, 2011

  
    Number  of
Loans		     Loan
Balance		     Specific
Reserve 		    Number  of
Loans		     Loan
Balance		     Specific
Reserve 		 

Commercial, industrial, and agricultural

     2     $ 1,420     $ -       -     $ -     $ -  

Commercial mortgages

     8       10,201       1,099       3       7,688       228  

Residential real estate

     -       -       -       -       -       -  

Consumer

     -       -       -       -       -       -  

Credit cards

     -       -       -       -       -       -  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

     10     $ 11,621     $ 1,099       3     $ 7,688     $ 228  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table presents loans by class modified as troubled debt restructurings that occurred during the years ended December 31, 2012 and 2011:

 

                         
   

Year Ended December 31, 2012

  
    Number of
Loans		     Pre-Modification
Outstanding Recorded
Investment		     Post-Modification
Outstanding Recorded
Investment		  

Commercial, industrial, and agricultural

     2     $ 1,455     $ 1,455  

Commercial mortgages

     5       2,717       2,717  

Residential real estate

     -       -       -  

Consumer

     -       -       -  

Credit cards

     -       -       -  
   

 

 

    

 

 

    

 

 

  

Total

     7     $ 4,172     $ 4,172  
   

 

 

    

 

 

    

 

 

  
   
   

Year Ended December 31, 2011

  
    Number of
Loans		     Pre-Modification
Outstanding Recorded
Investment		     Post-Modification
Outstanding Recorded
Investment		  

Commercial, industrial, and agricultural

     -     $ -     $ -  

Commercial mortgages

     2       6,041       6,041  

Residential real estate

     -       -       -  

Consumer

     -       -       -  

Credit cards

     -       -       -  
   

 

 

    

 

 

    

 

 

  

Total

     2     $ 6,041     $ 6,041  
   

 

 

    

 

 

    

 

 

  

The troubled debt restructurings described above increased the allowance for loan losses by $101 and $0 during the years ended December 31, 2012 and 2011, respectively.

Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from 4-15 years. Modifications involving an extension of the maturity date were for periods ranging from 4-18 years.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. Except as discussed below, all loans modified in troubled debt restructurings are performing in accordance with their modified terms as of December 31, 2012 and 2011 and no principal balances were forgiven in connection with the loan restructurings. During the year ended December 31, 2012, one commercial mortgage loan with a balance of $1,660 defaulted under its restructured terms and was placed on nonaccrual status, resulting in an increase in the allowance for loan losses of $503. No loans that were modified in a troubled debt restructuring were charged off during the years ended December 31, 2012 and 2011.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without a loan modification. This evaluation is performed using the Corporation’s internal underwriting policies. The Corporation has no further loan commitments to customers whose loans are classified as a troubled debt restructuring.

 

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. This analysis includes loans with an outstanding balance greater than $1 million bi-annually and loans with an outstanding balance of less than $1 million 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.

 

                                         
December 31, 2012   Pass     Special
Mention		     Substandard     Doubtful     Total  

Commercial, industrial, and agricultural

   $ 234,835     $ 6,641     $ 15,459     $ 156     $ 257,091  

Commercial mortgages

     225,294       12,294       23,501       702       261,791  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 460,129     $ 18,935     $ 38,960     $ 858     $ 518,882  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
           
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 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 December 31, 2012 and 2011:

 

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

Performing

   $ 345,094     $ 58,441     $ 4,787     $ 297,217     $ 53,341     $ 4,385  

Non-performing

     2,810       227       13       1,411       130       27  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 347,904     $ 58,668     $ 4,800     $ 298,628     $ 53,471     $ 4,412  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The Corporation’s portfolio of residential real estate and consumer loans maintained within 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. The Bank does not have any subprime loans. Holiday’s loan portfolio is summarized as follows at December 31, 2012 and 2011:

 

                 
    2012     2011  

Consumer

   $ 21,535     $ 18,176  

Residential real estate

     954       1,056  

Less: unearned discount

     (3,401 )      (2,886 ) 
   

 

 

    

 

 

  

Total

   $ 19,088     $ 16,346