Loans

3 Months Ended

Mar. 31, 2019

Loans And Leases Receivable Disclosure [Abstract]

(5.)LOANS

The Company’s loan portfolio consisted of the following as of the dates indicated (in thousands):

	Principal Amount Outstanding		Net Deferred Loan (Fees) Costs			Loans, Net
March 31, 2019
Commercial business	$	552,834	$	911		$	553,745
Commercial mortgage		995,183		(1,924	)		993,259
Residential real estate loans		525,036		9,655			534,691
Residential real estate lines		105,592		3,031			108,623
Consumer indirect		872,410		30,352			902,762
Other consumer		15,941		158			16,099
Total	$	3,066,996	$	42,183			3,109,179
Allowance for loan losses							(33,327	)
Total loans, net						$	3,075,852
December 31, 2018
Commercial business	$	557,040	$	821		$	557,861
Commercial mortgage		960,265		(2,071	)		958,194
Residential real estate loans		514,981		9,174			524,155
Residential real estate lines		106,712		3,006			109,718
Consumer indirect		888,732		31,185			919,917
Other consumer		16,590		163			16,753
Total	$	3,044,320	$	42,278			3,086,598
Allowance for loan losses							(33,914	)
Total loans, net						$	3,052,684

Loans held for sale (not included above) were comprised entirely of residential real estate mortgages and totaled $2.1 million and $2.9 million as of March 31, 2019 and December 31, 2018, respectively.

Past Due Loans Aging

The Company’s recorded investment, by loan class, in current and nonaccrual loans, as well as an analysis of accruing delinquent loans is set forth as of the dates indicated (in thousands):

	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Nonaccrual		Current		Total Loans
March 31, 2019
Commercial business	$	328	$	150	$	—	$	478	$	594	$	551,762	$	552,834
Commercial mortgage		443		375		—		818		909		993,456		995,183
Residential real estate loans		924		367		—		1,291		2,225		521,520		525,036
Residential real estate lines		150		15		—		165		252		105,175		105,592
Consumer indirect		1,388		497		—		1,885		1,822		868,703		872,410
Other consumer		87		8		2		97		—		15,844		15,941
Total loans, gross	$	3,320	$	1,412	$	2	$	4,734	$	5,802	$	3,056,460	$	3,066,996
December 31, 2018
Commercial business	$	227	$	1	$	—	$	228	$	912	$	555,900	$	557,040
Commercial mortgage		574		—		—		574		1,586		958,105		960,265
Residential real estate loans		1,295		242		—		1,537		2,391		511,053		514,981
Residential real estate lines		102		—		—		102		255		106,355		106,712
Consumer indirect		2,424		698		—		3,122		1,989		883,621		888,732
Other consumer		139		3		8		150		—		16,440		16,590
Total loans, gross	$	4,761	$	944	$	8	$	5,713	$	7,133	$	3,031,474	$	3,044,320

(5.)LOANS (Continued)

There were no loans past due greater than 90 days and still accruing interest as of March 31, 2019 and December 31, 2018. There were $2 thousand and $8 thousand in consumer overdrafts which were past due greater than 90 days as of March 31, 2019 and December 31, 2018, respectively. Consumer overdrafts are overdrawn deposit accounts which have been reclassified as loans but by their terms do not accrue interest.

Troubled Debt Restructurings

A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification constitutes a concession. Commercial loans modified in a TDR may involve temporary interest-only payments, term extensions, reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, collateral concessions, forgiveness of principal, forbearance agreements, or substituting or adding a new borrower or guarantor.

There were no loans modified as a TDR during the three months ended March 31, 2019 and 2018. There were no loans modified as a TDR within the previous 12 months that defaulted during the three months ended March 31, 2019 and 2018. For purposes of this disclosure, a loan modified as a TDR is considered to have defaulted when the borrower becomes 90 days past due.

Impaired Loans

Management has determined that specific commercial loans on nonaccrual status and all loans that have had their terms restructured in a troubled debt restructuring are impaired loans. The following table presents the recorded investment, unpaid principal balance and related allowance of impaired loans as of the dates indicated and average recorded investment and interest income recognized on impaired loans for the three months ended March 31, 2019 and twelve-month period ended December 31, 2018 (in thousands):

	Recorded Investment ⁽¹⁾		Unpaid Principal Balance ⁽¹⁾		Related Allowance		Average Recorded Investment		Interest Income Recognized
March 31, 2019
With no related allowance recorded:
Commercial business	$	221	$	292	$	—	$	356	$	—
Commercial mortgage		1,333		2,109		—		1,730		—
		1,554		2,401		—		2,086		—
With an allowance recorded:
Commercial business		504		504		181		660		—
Commercial mortgage		19		19		2		20		—
		523		523		183		680		—
	$	2,077	$	2,924	$	183	$	2,766	$	—
December 31, 2018
With no related allowance recorded:
Commercial business	$	319	$	487	$	—	$	1,156	$	—
Commercial mortgage		2,013		2,789		—		692		—
		2,332		3,276		—		1,848		—
With an allowance recorded:
Commercial business		725		725		205		2,458		—
Commercial mortgage		21		21		1		1,936		—
		746		746		206		4,394		—
	$	3,078	$	4,022	$	206	$	6,242	$	—

⁽¹⁾	Difference between recorded investment and unpaid principal balance represents partial charge-offs.

(5.)LOANS (Continued)

Credit Quality Indicators

The Company categorizes 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 such as the fair value of collateral. The Company analyzes commercial business and commercial mortgage loans individually by classifying the loans as to credit risk. Risk ratings are updated any time the situation warrants. The Company 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 Company’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 Company 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 that do not meet the criteria above that are analyzed individually as part of the process described above are considered “uncriticized” or pass-rated loans and are included in groups of homogeneous loans with similar risk and loss characteristics.

The following table sets forth the Company’s commercial loan portfolio, categorized by internally assigned asset classification, as of the dates indicated (in thousands):

	Commercial Business		Commercial Mortgage
March 31, 2019
Uncriticized	$	524,977	$	979,254
Special mention		18,266		4,186
Substandard		9,591		11,743
Doubtful		—		—
Total	$	552,834	$	995,183
December 31, 2018
Uncriticized	$	531,756	$	943,991
Special mention		16,499		10,633
Substandard		8,785		5,641
Doubtful		—		—
Total	$	557,040	$	960,265

The Company utilizes payment status as a means of identifying and reporting problem and potential problem retail loans. The Company considers nonaccrual loans and loans past due greater than 90 days and still accruing interest to be non-performing. The following table sets forth the Company’s retail loan portfolio, categorized by payment status, as of the dates indicated (in thousands):

	Residential Real Estate Loans		Residential Real Estate Lines		Consumer Indirect		Other Consumer
March 31, 2019
Performing	$	522,811	$	105,340	$	870,588	$	15,939
Non-performing		2,225		252		1,822		2
Total	$	525,036	$	105,592	$	872,410	$	15,941
December 31, 2018
Performing	$	512,590	$	106,457	$	886,743	$	16,582
Non-performing		2,391		255		1,989		8
Total	$	514,981	$	106,712	$	888,732	$	16,590

(5.)LOANS (Continued)

Allowance for Loan Losses

The following table sets forth the changes in the allowance for loan losses for the three-month periods ended as of the dates indicated (in thousands):

	Commercial Business			Commercial Mortgage			Residential Real Estate Loans			Residential Real Estate Lines			Consumer Indirect			Other Consumer			Total
March 31, 2019
Allowance for loan losses:
Beginning balance	$	14,312		$	5,219		$	1,112		$	210		$	12,572		$	489		$	33,914
Charge-offs		(130	)		—			(31	)		—			(2,982	)		(309	)		(3,452	)
Recoveries		103			17			6			2			1,424			120			1,672
Provision (credit)		(2,118	)		1,080			178			(39	)		2,011			81			1,193
Ending balance	$	12,167		$	6,316		$	1,265		$	173		$	13,025		$	381		$	33,327
Evaluated for impairment:
Individually	$	181		$	2		$	—		$	—		$	—		$	—		$	183
Collectively	$	11,986		$	6,314		$	1,265		$	173		$	13,025		$	381		$	33,144
Loans:
Ending balance	$	552,834		$	995,183		$	525,036		$	105,592		$	872,410		$	15,941		$	3,066,996
Evaluated for impairment:
Individually	$	725		$	1,352		$	—		$	—		$	—		$	—		$	2,077
Collectively	$	552,109		$	993,831		$	525,036		$	105,592		$	872,410		$	15,941		$	3,064,919
March 31, 2018
Allowance for loan losses:
Beginning balance	$	15,668		$	3,696		$	1,322		$	180		$	13,415		$	391		$	34,672
Charge-offs		(105	)		(4	)		(19	)		(94	)		(2,994	)		(433	)		(3,649	)
Recoveries		120			7			69			3			1,330			93			1,622
Provision (credit)		(741	)		1,774			28			129			1,481			278			2,949
Ending balance	$	14,942		$	5,473		$	1,400		$	218		$	13,232		$	329		$	35,594
Evaluated for impairment:
Individually	$	1,699		$	719		$	—		$	—		$	—		$	—		$	2,418
Collectively	$	13,243		$	4,754		$	1,400		$	218		$	13,232		$	329		$	33,176
Loans:
Ending balance	$	463,526		$	823,305		$	470,111		$	112,428		$	866,598		$	16,482		$	2,752,450
Evaluated for impairment:
Individually	$	4,453		$	2,791		$	—		$	—		$	—		$	—		$	7,244
Collectively	$	459,073		$	820,514		$	470,111		$	112,428		$	866,598		$	16,482		$	2,745,206

Risk Characteristics

Commercial business loans primarily consist of loans to small to mid-sized businesses in our market area in a diverse range of industries. These loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value. The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any.

Commercial mortgage loans generally have larger balances and involve a greater degree of risk than residential mortgage loans, potentially resulting in higher potential losses on an individual customer basis. Loan repayment is often dependent on the successful operation and management of the properties, as well as on the collateral securing the loan. Economic events or conditions in the real estate market could have an adverse impact on the cash flows generated by properties securing the Company’s commercial real estate loans and on the value of such properties.

(5.)LOANS (Continued)

Residential real estate loans (comprised of conventional mortgages and home equity loans) and residential real estate lines (comprised of home equity lines) are generally made based on the borrower’s ability to make repayment from his or her employment and other income but are secured by real property whose value tends to be more easily ascertainable. Credit risk for these types of loans is generally influenced by general economic conditions, the characteristics of individual borrowers, and the nature of the loan collateral.

Consumer indirect and other consumer loans may entail greater credit risk than residential mortgage loans and home equities, particularly in the case of other consumer loans which are unsecured or, in the case of indirect consumer loans, secured by depreciable assets, such as automobiles or boats. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances such as job loss, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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