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ALLOWANCE FOR LOAN LOSSES:
 12 Months Ended
Dec. 31, 2012
Allowance For Loan Losses Disclosure [Abstract]  
ALLOWANCE FOR LOAN LOSSES
7. ALLOWANCE FOR LOAN LOSSES:

 

The following table presents the activity of the allowance for loan losses by portfolio segment for the years ended December 31, 2012 and 2011.

 

Allowance for Loan Losses:         December 31, 2012        
(Dollar amounts in thousands)   Commercial     Residential     Consumer     Unallocated     Total  
Beginning balance   $ 12,119     $ 2,728     $ 3,889     $ 505     $ 19,241  
Provision for loan losses*     2,400       5,196       2,243       1,161       11,000  
Loans charged -off     (4,176 )     (2,598 )     (3,640 )     -       (10,414 )
Recoveries     644       100       1,387       -       2,131  
Ending Balance   $ 10,987     $ 5,426     $ 3,879     $ 1,666     $ 21,958  

  * Provision before decrease of $2.2 million in 2012 for increase in FDIC indemnification asset

 

Allowance for Loan Losses:         December 31, 2011        
(Dollar amounts in thousands)   Commercial     Residential     Consumer     Unallocated     Total  
Beginning balance   $ 12,809     $ 2,873     $ 4,551     $ 2,103     $ 22,336  
Provision for loan losses*     3,708       2,571       1,199       (1,598 )     5,880  
Loans charged -off     (5,336 )     (2,811 )     (2,969 )     -       (11,116 )
Recoveries     938       95       1,108       -       2,141  
Ending Balance   $ 12,119     $ 2,728     $ 3,889     $ 505     $ 19,241  

  * Provision before decrease of $125 thousand in 2011 for increase in FDIC indemnification asset

 

Changes in the allowance for loan losses for 2010 are summarized as follows:

 

    December 31,  
(Dollar amounts in thousands)     2010  
         
Balance at beginning of year   $ 19,437  
Provision for loan losses *     10,862  
Recoveries of loans previously charged off     4,511  
Loans charged off     (12,474 )
BALANCE AT END OF YEAR   $ 22,336  

  * In 2010 the provision charged to expense was reduced by $1.7 million for the increase to the FDIC Indemnification asset.

 

The following tables present the allocation of the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method at December 31, 2012 and 2011:

 

Allowance for Loan Losses:         December 31, 2012              
(Dollar amounts in thousands)   Commercial     Residential     Consumer     Unallocated     Total  
Individually evaluated for impairment   $ 3,453     $ 3,920     $ -     $ -     $ 7,373  
Collectively evaluated for impairment     7,286       1,506       3,879       1,666       14,337  
Acquired with deteriorated credit quality     248       -       -       -       248  
BALANCE AT END OF YEAR   $ 10,987     $ 5,426     $ 3,879     $ 1,666     $ 21,958  
                                         
Loans                                        
(Dollar amounts in thousands)     Commercial          Residential          Consumer                  Total     
Individually evaluated for impairment   $ 23,721     $ 6,973     $ -             $ 30,694  
Collectively evaluated for impairment     1,056,861       487,486       269,882               1,814,229  
Acquired with deteriorated credit quality     13,582       3,421       6               17,009  
BALANCE AT END OF YEAR   $ 1,094,164     $ 497,880     $ 269,888             $ 1,861,932  

 

Allowance for Loan Losses:         December 31, 2011              
(Dollar amounts in thousands)   Commercial     Residential     Consumer     Unallocated     Total  
Individually evaluated for impairment   $ 3,071     $ 190     $ -     $ -     $ 3,261  
Collectively evaluated for impairment     8,264       2,183       3,889       505       14,841  
Acquired with deteriorated credit quality     784       355       -       -       1,139  
BALANCE AT END OF YEAR   $ 12,119     $ 2,728     $ 3,889     $ 505     $ 19,241  
                                         
Loans                                        
(Dollar amounts in thousands)     Commercial       Residential       Consumer               Total  
Individually evaluated for impairment   $ 25,393     $ 2,213     $ -             $ 27,606  
Collectively evaluated for impairment     1,036,963       492,139       291,190               1,820,292  
Acquired with deteriorated credit quality     43,389       12,986       11               56,386  
BALANCE AT END OF YEAR   $ 1,105,745     $ 507,338     $ 291,201             $ 1,904,284  

 

The following table presents loans individually evaluated for impairment by class of loan.

 

December 31, 2012               Allowance                 Cash Basis  
    Unpaid           for Loan     Average     Interest     Interest  
    Principal     Recorded     Losses     Recorded     Income     Income  
    Balance     Investment     Allocated     Investment     Recognized     Recognized  
With no related allowance recorded:                                                
Commercial                                                
Commercial & Industrial   $ -     $ -     $ -     $ 1,013     $ -     $ -  
Farmland     -       -       -       -       -       -  
Non Farm, Non Residential     -       -       -       1,679       -       -  
Agriculture     -       -       -       -       -       -  
All Other Commercial     -       -       -       -       -       -  
Residential                                                
First Liens     -       -       -       150       -       -  
Home Equity     -       -       -       -       -       -  
Junior Liens     -       -       -       -       -       -  
Multifamily     -       -       -       50       -       -  
All Other Residential     -       -       -       -       -       -  
Consumer                                                
Motor Vehicle     -       -       -       -       -       -  
All Other Consumer     -       -       -       -       -       -  
With an allowance recorded:                                                
Commercial                                                
Commercial & Industrial     17,262       17,098       3,153       16,738       -       -  
Farmland     891       891       191       891       -       -  
Non Farm, Non Residential     7,438       7,386       293       5,000       179       -  
Agriculture     -       -       -       -       -       -  
All Other Commercial     1,209       1,209       52       1,362       -       -  
Residential                                                
First Liens     1,254       1,254       126       1,230       -       -  
Home Equity     179       179       -       75       -       -  
Junior Liens     -       -       -       176       -       -  
Multifamily     5,540       5,540       3,794       2,216       -       -  
All Other Residential     -       -       -       -       -       -  
Consumer                                                
Motor Vehicle     -       -       -       -       -       -  
All Other Consumer     -       -       -       -       -       -  
TOTAL   $ 33,773     $ 33,557     $ 7,609     $ 30,580     $ 179     $ -  

 

For 2012, the unpaid principal balance has not been reduced for partial charge-offs.

 

December 31, 2011               Allowance                 Cash Basis  
    Unpaid           for Loan     Average     Interest     Interest  
    Principal     Recorded     Losses     Recorded     Income     Income  
    Balance     Investment     Allocated     Investment     Recognized     Recognized  
With no related allowance recorded:                                                
Commercial                                                
Commercial & Industrial   $ -     $ -     $ -     $ 1,929     $ 165     $ -  
Farmland     -       -       -       -       -       -  
Non Farm, Non Residential     4,444       4,444       -       3,262       -       -  
Agriculture     -       -       -       -       -       -  
All Other Commercial     -       -       -       -       -       -  
Residential                                                
First Liens     750       750       -       150       -       -  
Home Equity     -       -       -       -       -       -  
Junior Liens     -       -       -       -       -       -  
Multifamily     250       250       -       50       -       -  
All Other Residential     -       -       -       -       -       -  
Consumer                                                
Motor Vehicle     -       -       -       -       -       -  
All Other Consumer     -       -       -       -       -       -  
With an allowance recorded:                                                
Commercial                                                
Commercial & Industrial     17,890       17,866       2,664       16,746       -       -  
Farmland     891       891       49       360       -       -  
Non Farm, Non Residential     4,816       4,816       957       8,717       -       -  
Agriculture     -       -       -       -       -       -  
All Other Commercial     1,517       1,517       66       1,671       -       -  
Residential                                                
First Liens     1,213       1,213       190       2,014       -       -  
Home Equity     -       -       -       -       -       -  
Junior Liens     879       879       347       937       -       -  
Multifamily     -       -       -       510       -       -  
All Other Residential     -       -       -       -       -       -  
Consumer                                                
Motor Vehicle     -       -       -       -       -       -  
All Other Consumer     -       -       -       -       -       -  
TOTAL   $ 32,650     $ 32,626     $ 4,273     $ 36,346     $ 165     $ -  

 

For 2011, the unpaid principal balance has been reduced for partial charge-offs.

 

(Dollar amounts in thousands)   2010  
Average of impaired loans during the year   $ 27,772  
Interest income recognized during impairment     660  
Cash-basis interest income recognized     57  

 

The following table presents the recorded investment in nonperforming loans by class of loans.

 

    Loans Past                 Loans Past              
    Due Over         Due Over      
    90 Day Still     December 31, 2012     90 Day Still     December 31, 2011  
(Dollar amounts in thousands)   Accruing     Restructured     Nonaccrual     Accruing     Restructured     Nonaccrual  
Commercial                                                
Commercial & Industrial   $ 724     $ 11,573     $ 9,360     $ 317     $ 12,590     $ 9,673  
Farmland     231       -       907       74       -       979  
Non Farm, Non Residential     491       4,836       6,718       237       -       12,542  
Agriculture     69       -       104       -       -       225  
All Other Commercial     -       -       4,811       -       -       3,171  
Residential                                                
First Liens     1,237       4,126       6,852       1,150       3,856       7,398  
Home Equity     24       -       196       8       -       -  
Junior Liens     538       -       405       154       898       1,240  
Multifamily     101       -       5,598       -       -       668  
All Other Residential     -       -       150       136       -       171  
Consumer                                                
Motor Vehicle     133       685       174       77       -       294  
All Other Consumer     3       16       1,519       4       -       1,741  
TOTAL   $ 3,551     $ 21,236     $ 36,794     $ 2,157     $ 17,344     $ 38,102  

 

Covered loans included in loans past due over 90 days still on accrual are $630 thousand at December 31, 2012 and $413 thousand at December 31, 2011. Covered loans included in non-accrual loans are $4.3 million at December 31, 2012 and $5.6 million at December 31, 2011. Covered loans of $2.9 million are deemed impaired at December 31, 2012 and have allowance for loan loss allocated to them of $236 thousand. On December 31, 2011 there were $5.0 million of covered loans deemed impaired that had an allowance for loan loss allocated to them of $1.0 million. Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

 

During the years ending December 31, 2012 and 2011, the terms of certain loans were modified as troubled debt restructurings (TDRs). In 2012, new TDRs included two commercial loans totaling $5.1 million, four residential loans totaling $13 thousand and one hundred and fifty five consumer loans totaling $864 thousand. In 2012, the dollar amount of loans modified in trouble debt restructurings that defaulted within 12 months of their modification were charged off included one commercial loan for $879 thousand, one residential loan for $31 thousand and four installment loans totaling $14 thousand. In 2011, new TDRs included four commercial loans totaling $631 thousand and four residential loans totaling $212 thousand. In 2011, the dollar amount of loans modified in trouble debt restructurings that defaulted within 12 months of their modification and were charged off was insignificant to the allowance for loan losses. There was no impact to the provision for loan losses as a result of these transactions.

 

Modification of the terms of such loans typically include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. No modification in 2012 or 2011 resulted in the permanent reduction of the recorded investment in the loan. Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from twelve months to five years. Modifications involving an extension of the maturity date were for periods ranging from twelve months to 10 years.

 

The Corporation has allocated $1.6 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings at both December 31, 2012 and 2011. The Corporation has not committed to lend additional amounts as of December 31, 2012 and 2011 to customers with outstanding loans that are classified as troubled debt restructurings.

 

The following table presents the aging of the recorded investment in loans by past due category and class of loans.

 

                Greater                    
December 31, 2012   30-59 Days     60-89 Days     than 90 days     Total              
(Dollar amounts in thousands)   Past Due     Past Due     Past Due     Past Due     Current     Total  
Commercial                                                
Commercial & Industrial   $ 1,315     $ 861     $ 3,616     $ 5,792     $ 487,160     $ 492,952  
Farmland     534       -       1,122       1,656       87,270       88,926  
Non Farm, Non Residential     5,618       1,004       2,449       9,071       290,023       299,094  
Agriculture     137       -       78       215       130,404       130,619  
All Other Commercial     568       202       350       1,120       81,453       82,573  
Residential                                                
First Liens     8,359       1,659       4,599       14,617       336,230       350,847  
Home Equity     143       15       24       182       43,317       43,499  
Junior Liens     555       98       586       1,239       36,535       37,774  
Multifamily     52       -       5,641       5,693       49,019       54,712  
All Other Residential     214       -       -       214       10,834       11,048  
Consumer                                                
Motor Vehicle     4,164       600       182       4,946       241,303       246,249  
All Other Consumer     225       93       3       321       23,318       23,639  
TOTAL   $ 21,884     $ 4,532     $ 18,650     $ 45,066     $ 1,816,866     $ 1,861,932  

 

                Greater                    
December 31, 2011   30-59 Days     60-89 Days     than 90 days     Total              
(Dollar amounts in thousands)   Past Due     Past Due     Past Due     Past Due     Current     Total  
Commercial                                                
Commercial & Industrial   $ 2,717     $ 740     $ 4,452     $ 7,909     $ 472,370     $ 480,279  
Farmland     5       57       1,034       1,096       98,159       99,255  
Non Farm, Non Residential     2,945       420       7,754       11,119       310,724       321,843  
Agriculture     88       -       97       185       114,162       114,347  
All Other Commercial     120       -       1,588       1,708       88,313       90,021  
Residential                                                
First Liens     11,435       2,016       5,316       18,767       340,269       359,036  
Home Equity     175       62       8       245       44,939       45,184  
Junior Liens     1,333       183       190       1,706       39,903       41,609  
Multifamily     -       100       668       768       46,216       46,984  
All Other Residential     128       -       136       264       14,261       14,525  
Consumer                                                
Motor Vehicle     3,450       563       77       4,090       260,102       264,192  
All Other Consumer     174       48       5       227       26,782       27,009  
TOTAL   $ 22,570     $ 4,189     $ 21,325     $ 48,084     $ 1,856,200     $ 1,904,284  

 

Credit Quality Indicators:

 

The Corporation 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. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial loans, with an outstanding balance greater than $50 thousand. Any consumer loans outstanding to a borrower who had commercial loans analyzed will be similarly risk rated. This analysis is performed on a quarterly basis. 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 institution’s credit position at some future date.

 

Substandard: Loans classified as substandard are inadequately protected by the current net worth and debt service capacity of the borrower or of any pledged collateral. These loans have a well-defined weakness or weaknesses which have clearly jeopardized repayment of principal and interest as originally intended. They are characterized by the distinct possibility that the institution will sustain some future loss if the deficiencies are not corrected.

 

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those graded substandard, with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values.

 

Furthermore, non-homogeneous loans which were not individually analyzed, but are 90+ days past due or on non-accrual are classified as substandard. Loans included in homogeneous pools, such as residential or consumer, may be classified as substandard due to 90+ days delinquency, non-accrual status, bankruptcy, or loan restructuring.

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are either less than $50 thousand or are included in groups of homogeneous loans. As of December 31, 2012 and 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

December 31, 2012         Special                          
(Dollar amounts in thousands)   Pass     Mention     Substandard     Doubtful     Not Rated     Total  
Commercial                                                
Commercial & Industrial   $ 414,680     $ 31,368     $ 31,442     $ 7,138     $ 7,025     $ 491,653  
Farmland     81,977       2,718       1,616       -       805       87,116  
Non Farm, Non Residential     249,614       25,764       22,038       831       42       298,289  
Agriculture     119,789       8,921       134       -       62       128,906  
All Other Commercial     69,952       132       11,239       54       803       82,180  
Residential                                                
First Liens     113,360       8,986       11,516       689       215,034       349,585  
Home Equity     13,035       469       1,631       23       28,267       43,425  
Junior Liens     10,419       50       515       70       26,575       37,629  
Multifamily     42,719       3,328       8,481       59       -       54,587  
All Other Residential     2,840       -       35       -       8,136       11,011  
Consumer                                                
Motor Vehicle     11,695       262       311       25       232,727       245,020  
All Other Consumer     4,614       73       104       21       18,675       23,487  
TOTAL   $ 1,134,694     $ 82,071     $ 89,062     $ 8,910     $ 538,151     $ 1,852,888  

 

December 31, 2011         Special                          
(Dollar amounts in thousands)   Pass     Mention     Substandard     Doubtful     Not Rated     Total  
Commercial                                                
Commercial & Industrial   $ 386,734     $ 25,343     $ 53,026     $ 7,128     $ 6,717     $ 478,948  
Farmland     89,213       4,250       3,015       69       619       97,166  
Non Farm, Non Residential     254,761       28,684       32,704       4,271       393       320,813  
Agriculture     109,869       2,100       623       79       122       112,793  
All Other Commercial     77,330       6,097       5,099       67       1,011       89,604  
Residential                                                
First Liens     113,234       5,175       19,895       1,318       218,118       357,740  
Home Equity     13,613       520       671       19       30,278       45,101  
Junior Liens     11,887       714       783       968       27,105       41,457  
Multifamily     35,837       3,911       6,224       606       258       46,836  
All Other Residential     4,658       445       53       -       9,310       14,466  
Consumer                                                
Motor Vehicle     12,988       330       501       59       249,018       262,896  
All Other Consumer     6,120       57       141       12       20,491       26,821  
TOTAL   $ 1,116,244     $ 77,626     $ 122,735     $ 14,596     $ 563,440     $ 1,894,641