Loan and Lease Financings

6 Months Ended

Jun. 30, 2011

Loan and Lease Financings

Loan and Lease Financings

Note 4.       Loan and Lease Financings

We evaluate loans and leases for credit quality at least annually but more frequently if certain circumstances occur (such as material new information which becomes available and indicates a potential change in credit risk).  We use two methods to assess credit risk: loan or lease credit quality grades and credit risk classifications.  The purpose of the loan or lease credit quality grade is to document the degree of risk associated with individual credits as well as inform management of the degree of risk in the portfolio taken as a whole.  Credit risk classifications are used to categorize loans by degree of risk and to designate committee approval authorities for higher risk credits at the time of origination.  Credit risk classifications include categories for:  Acceptable, Marginal, Special Attention, Special Risk, Restricted by Policy, Regulated and Prohibited by Law.

All loans and leases, except residential real estate loans and consumer loans, are assigned credit quality grades on a scale from 1 to 12 with grade 1 representing superior credit quality.  The criteria used to assign grades to extensions of credit that exhibit potential problems or well-defined weaknesses are primarily based upon the degree of risk and the likelihood of orderly repayment, and their effect on our safety and soundness.  Loans or leases graded 7 or weaker are considered “special attention” credits and, as such, relationships in excess of $100,000 are reviewed quarterly as part of management’s evaluation of the adequacy of the reserve for loan and lease losses.  Grade 7 credits are defined as “watch” and contain greater than average credit risk and are monitored to limit our exposure to increased risk; grade 8 credits are “special mention” and, following regulatory guidelines, are defined as having potential weaknesses that deserve management’s close attention.  Credits that exhibit well-defined weaknesses and a distinct possibility of loss are considered ‘‘classified’’ and are graded 9 through 12 corresponding to the regulatory definitions of “substandard” (grades 9 and 10) and the more severe ‘‘doubtful’’ (grade 11) and ‘‘loss’’ (grade 12).

The table below presents the credit quality grades of the recorded investment in loans and leases, segregated by class.

	Credit Quality Grades
(Dollars in thousands)	1-6		7-12		Total
June 30, 2011
Commercial and agricultural loans	$	504,680	$	47,140	$	551,820
Auto, light truck and environmental equipment	468,911		5,014		473,925
Medium and heavy duty truck	140,418		15,005		155,423
Aircraft financing	560,855		46,712		607,567
Construction equipment financing	249,834		25,134		274,968
Commercial real estate	508,983		59,243		568,226
Total	$	2,433,681	$	198,248	$	2,631,929
December 31, 2010
Commercial and agricultural loans	$	483,603	$	46,625	$	530,228
Auto, light truck and environmental equipment	389,774		6,726		396,500
Medium and heavy duty truck	143,431		19,393		162,824
Aircraft financing	555,106		59,251		614,357
Construction equipment financing	246,644		38,990		285,634
Commercial real estate	532,581		62,148		594,729
Total	$	2,351,139	$	233,133	$	2,584,272

The table below presents the recorded investment in residential real estate and consumer loans by performing or non-performing status.  Non-performing loans are those loans which are on nonaccrual status or are 90 days or more past due.

(Dollars in thousands)	Performing		Nonperforming		Total
June 30, 2011
Residential real estate	$	385,901	$	4,488	$	390,389
Consumer	95,427		412		95,839
Total	$	481,328	$	4,900	$	486,228
December 31, 2010
Residential real estate	$	385,729	$	5,222	$	390,951
Consumer	94,973		427		95,400
Total	$	480,702	$	5,649	$	486,351

The table below presents the recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status.

							90 Days
							or More
			30-59 Days		60-89 Days		Past Due		Total				Total Financing
(Dollars in thousands)	Current		Past Due		Past Due		and Accruing		Accruing Loans		Nonaccrual		Receivables
June 30, 2011
Commercial and agricultural loans	$	545,602	$	792	$	160	$	—	$	546,554	$	5,266	$	551,820
Auto, light truck and environmental equipment	470,680		468		240		—		471,388		2,537		473,925
Medium and heavy duty truck	151,076		138		3		—		151,217		4,206		155,423
Aircraft financing	586,772		3,640		124		—		590,536		17,031		607,567
Construction equipment financing	267,846		1,364		1,482		—		270,692		4,276		274,968
Commercial real estate	538,707		1,682		796		—		541,185		27,041		568,226
Residential real estate	382,960		2,222		719		272		386,173		4,216		390,389
Consumer	94,220		935		272		65		95,492		347		95,839
Total	$	3,037,863	$	11,241	$	3,796	$	337	$	3,053,237	$	64,920	$	3,118,157
December 31, 2010
Commercial and agricultural loans	$	521,363	$	760	$	22	$	—	$	522,145	$	8,083	$	530,228
Auto, light truck and environmental equipment	391,925		528		715		—		393,168		3,332		396,500
Medium and heavy duty truck	157,723		33		—		—		157,756		5,068		162,824
Aircraft financing	580,174		16,097		188		—		596,459		17,898		614,357
Construction equipment financing	275,204		1,254		601		—		277,059		8,575		285,634
Commercial real estate	567,254		759		94		—		568,107		26,622		594,729
Residential real estate	381,368		3,781		580		264		385,993		4,958		390,951
Consumer	93,290		1,152		531		98		95,071		329		95,400
Total	$	2,968,301	$	24,364	$	2,731	$	362	$	2,995,758	$	74,865	$	3,070,623

A loan or lease is considered impaired, based on current information and events, if it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan or lease agreement.  The table below presents impaired loans and leases, segregated by class, and the corresponding reserve for impaired loan and lease losses.

			Unpaid
	Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Allowance
June 30, 2011
With no related allowance recorded:
Commercial and agricultural loans	$	2,771	$	2,771	$	—
Auto, light truck and environmental equipment	1,387		1,387		—
Medium and heavy duty truck	3,244		3,244		—
Aircraft financing	13,938		13,938		—
Construction equipment financing	3,670		3,670		—
Commercial real estate	22,080		22,084		—
Total with no related allowance recorded	47,090		47,094		—
With an allowance recorded:
Commercial and agricultural loans	7,477		7,477		3,051
Auto, light truck and environmental equipment	446		446		105
Medium and heavy duty truck	989		989		172
Aircraft financing	3,008		3,008		817
Construction equipment financing	562		562		20
Commercial real estate	6,717		6,716		639
Total with an allowance recorded	19,199		19,198		4,804
Total impaired loans	$	66,289	$	66,292	$	4,804
December 31, 2010
With no related allowance recorded:
Commercial and agricultural loans	$	4,930	$	4,930	$	—
Auto, light truck and environmental equipment	1,596		1,597		—
Medium and heavy duty truck	1,748		1,748		—
Aircraft financing	4,509		4,509		—
Construction equipment financing	5,534		5,535		—
Commercial real estate	21,071		21,071		—
Total with no related allowance recorded	39,388		39,390		—
With an allowance recorded:
Commercial and agricultural loans	8,282		8,281		4,190
Auto, light truck and environmental equipment	1,136		1,136		377
Medium and heavy duty truck	3,347		3,347		1,049
Aircraft financing	13,913		13,913		2,050
Construction equipment financing	3,374		3,379		648
Commercial real estate	8,625		8,630		893
Total with an allowance recorded	38,677		38,686		9,207
Total impaired loans	$	78,065	$	78,076	$	9,207

Average recorded investment and interest income recognized on impaired loans and leases, segregated by class, is shown in the table below.

	Three Months Ended June 30,						Six Months Ended June 30,
	2011				2010		2011				2010
(Dollars in thousands)	Average Recorded Investment		Interest Income		Interest Income		Average Recorded Investment		Interest Income		Interest Income
Commercial and agricultural loans	$	11,342	$	114	$	181	$	12,156	$	230	$	206
Auto, light truck and environmental equipment	1,774		—		—		2,005		1		—
Medium and heavy duty truck	4,350		1		2		4,580		3		3
Aircraft financing	17,070		6		103		16,673		15		103
Construction equipment financing	6,289		8		81		7,300		16		169
Commercial real estate	30,448		49		20		30,156		114		44
Total	$	71,273	$	178	$	387	$	72,870	$	379	$	525

As of June 30, 2011 and December 31, 2010, we had $6.61 million and $7.31 million, respectively of performing loans classified as troubled debt restructuring.