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

NOTE D — LOANS

The Bank grants commercial, residential and consumer loans to customers primarily within southcentral Pennsylvania and northern Maryland and the surrounding area. A large portion of the loan portfolio is secured by real estate. Although the Bank has a diversified loan portfolio, its debtors' ability to honor their contracts is influenced by the region's economy.

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Corporation's internal risk rating system as of December 31, 2012 and 2011:

 

In thousands

Pass

 

Special

Mention

 

Substandard

 

Doubtful

 

Total

December 31, 2012

 

 

 

 

 

 

 

 

 

Commercial and industrial

$

44,072

 

 

$

2,491

 

 

$

2,441

 

 

$

—

 

 

$

49,004

 

Commercial real estate

205,449

 

 

20,379

 

 

17,191

 

 

—

 

 

243,019

 

Commercial real estate construction

7,354

 

 

9,820

 

 

1,980

 

 

—

 

 

19,154

 

Residential mortgage

321,986

 

 

4,502

 

 

2,348

 

 

—

 

 

328,836

 

Home equity lines of credit

51,096

 

 

1,776

 

 

258

 

 

—

 

 

53,130

 

Consumer

14,993

 

 

—

 

 

—

 

 

—

 

 

14,993

 

Total

$

644,950

 

 

$

38,968

 

 

$

24,218

 

 

$

—

 

 

$

708,136

 

December 31, 2011

 

 

 

 

 

 

 

 

 

Commercial and industrial

$

48,284

 

 

$

4,596

 

 

$

3,265

 

 

$

—

 

 

$

56,145

 

Commercial real estate

200,834

 

 

19,872

 

 

15,311

 

 

—

 

 

236,017

 

Commercial real estate construction

7,400

 

 

12,743

 

 

2,614

 

 

—

 

 

22,757

 

Residential mortgage

304,627

 

 

4,261

 

 

2,378

 

 

—

 

 

311,266

 

Home equity lines of credit

50,083

 

 

2,364

 

 

85

 

 

—

 

 

52,532

 

Consumer

15,751

 

 

—

 

 

—

 

 

—

 

 

15,751

 

Total

$

626,979

 

 

$

43,836

 

 

$

23,653

 

 

$

—

 

 

$

694,468

 

The following table summarizes information in regards to impaired loans by loan portfolio class as of December 31, 2012 and 2011:

 

 

Impaired Loans with Allowance

 

Impaired Loans with

No Allowance

In thousands

Recorded

Investment

 

Unpaid

Principal

Balance

 

Related

Allowance

 

Recorded

Investment

 

Unpaid

Principal

Balance

December 31, 2012

 

 

 

 

 

 

 

 

 

Commercial and industrial

$

146

 

 

$

146

 

 

$

29

 

 

$

195

 

 

$

1,310

 

Commercial real estate

237

 

 

276

 

 

7

 

 

8,772

 

 

9,216

 

Commercial real estate construction

—

 

 

—

 

 

—

 

 

854

 

 

1,128

 

Residential mortgage

—

 

 

—

 

 

—

 

 

938

 

 

1,263

 

Total

$

383

 

 

$

422

 

 

$

36

 

 

$

10,759

 

 

$

12,917

 

December 31, 2011

 

 

 

 

 

 

 

 

 

Commercial and industrial

$

1,967

 

 

$

3,102

 

 

$

1,085

 

 

$

252

 

 

$

1,367

 

Commercial real estate

273

 

 

273

 

 

43

 

 

6,339

 

 

7,136

 

Commercial real estate construction

—

 

 

—

 

 

—

 

 

2,614

 

 

7,192

 

Residential mortgage

88

 

 

88

 

 

53

 

 

1,313

 

 

1,638

 

Total

$

2,328

 

 

$

3,463

 

 

$

1,181

 

 

$

10,518

 

 

$

17,333

 

No additional funds are committed to be advanced in connection with impaired loans.

 

The following table summarizes information in regards to average of impaired loans and related interest income by loan portfolio class:

 

 

Impaired Loans with

Allowance

 

Impaired Loans with

No Allowance

In thousands

Average

Recorded

Investment

 

Interest

Income

 

Average

Recorded

Investment

 

Interest

Income

December 31, 2012

 

 

 

 

 

 

 

Commercial and industrial

$

431

 

 

$

—

 

 

$

223

 

 

$

—

 

Commercial real estate

691

 

 

—

 

 

8,193

 

 

11

 

Commercial real estate construction

336

 

 

—

 

 

1,242

 

 

—

 

Residential mortgage

18

 

 

—

 

 

1,390

 

 

—

 

Total

$

1,476

 

 

$

—

 

 

$

11,048

 

 

$

11

 

December 31, 2011

 

 

 

 

 

 

 

Commercial and industrial

$

1,019

 

 

$

—

 

 

$

349

 

 

$

—

 

Commercial real estate

2,324

 

 

—

 

 

4,946

 

 

44

 

Commercial real estate construction

—

 

 

—

 

 

3,463

 

 

—

 

Residential mortgage

340

 

 

—

 

 

1,119

 

 

—

 

Total

$

3,683

 

 

$

—

 

 

$

9,877

 

 

$

44

 

December 31, 2010

 

 

 

 

 

 

 

Commercial and industrial

$

904

 

 

$

—

 

 

$

66

 

 

$

—

 

Commercial real estate

1,166

 

 

6

 

 

3,661

 

 

29

 

Commercial real estate construction

4,882

 

 

61

 

 

562

 

 

—

 

Residential mortgage

24

 

 

—

 

 

1,339

 

 

4

 

Total

$

6,976

 

 

$

67

 

 

$

5,628

 

 

$

33

 

If interest on all nonaccrual loans had been accrued at original contract rates, interest income would have increased by $543,000 in 2012, $652,000 in 2011, and $464,000 in 2010

 

The following table presents nonaccrual loans by classes of the loan portfolio as of December 31, 2012 and 2011:

 

In thousands

2012

 

2011

Commercial and industrial

$

341

 

 

$

2,219

 

Commercial real estate

4,515

 

 

6,612

 

Commercial real estate construction

854

 

 

2,614

 

Residential mortgage

617

 

 

1,401

 

Total

$

6,327

 

 

$

12,846

 

.The following table summarizes information in regards to troubled debt restructurings by loan portfolio class at December 31, 2012 and 2011:

 

In thousands

Pre-Modification

Outstanding Recorded

Investments

 

Post-Modification

Outstanding Recorded

Investments

 

Recorded Investment

December 31, 2012

 

 

 

 

 

Nonaccruing troubled debt restructurings:

 

 

 

 

 

  Commercial and industrial

$

490

 

 

$

485

 

 

$

187

 

  Commercial real estate

1,304

 

 

1,304

 

 

953

 

  Commercial real estate construction

1,548

 

 

1,541

 

 

760

 

    Total nonaccruing troubled debt restructurings

3,342

 

 

3,330

 

 

1,900

 

Accruing troubled debt restructurings:

 

 

 

 

 

  Commercial real estate

4,577

 

 

4,577

 

 

4,494

 

  Residential mortgage

336

 

 

336

 

 

321

 

    Total accruing troubled debt restructurings

4,913

 

 

4,913

 

 

4,815

 

       Total Troubled Debt Restructurings

$

8,255

 

 

$

8,243

 

 

$

6,715

 

December 31, 2011

 

 

 

 

 

Nonaccruing troubled debt restructurings:

 

 

 

 

 

  Commercial and industrial

$

490

 

 

$

485

 

 

$

234

 

  Commercial real estate

656

 

 

656

 

 

412

 

  Commercial real estate construction

1,548

 

 

1,541

 

 

850

 

        Total Troubled Debt Restructurings

$

2,694

 

 

$

2,682

 

 

$

1,496

 

All of the Corporation's troubled debt restructured loans are also impaired loans, which resulted in a specific allocation and, subsequently, a charge-off as appropriate. As of December 31, 2011, charge-offs associated with troubled debt restructured loans while under a forbearance agreement totaled $589,000. An additional charge-off in the amount of $39,000 occurred during the first quarter of 2012. As of December 31, 2012, there was one defaulted troubled debt restructure and all other troubled debt restructured loans were current with respect to their associated forbearance agreements. One forbearance agreement was negotiated during 2009 and modified during 2011, two were negotiated during 2010, one was negotiated during 2011, while the other three were negotiated during 2012.

There are forbearance agreements on all loans currently classified as troubled debt restructures, and all of these agreements have resulted in additional principal repayment. The terms of these forbearance agreements vary whereby principal payments have been decreased, interest rates have been reduced, and/or the loan will be repaid as collateral is sold.

As a result of adopting the amendments in Accounting Standards Update (ASU) No. 2011-02, A Creditor's Determination of Whether Restructuring is a Troubled Debt Restructuring, the Corporation reassessed all loan modifications that occurred on or after January 1, 2011, for identification as troubled debt restructurings. The Corporation identified no loans for which the allowance for loan losses had previously been measured under a general allowance of credit losses methodology that are now considered troubled debt restructurings in accordance with ASU No. 2011-02.

The following table summarizes loans whose terms have been modified resulting in troubled debt restructurings during the year ended December 31, 2012. For the year ended December 31, 2011, there was one commercial real estate loan with a balance of $285,000 that was modified under a troubled debt restructuring.

 

 

Dollars in thousands

 

Number of Contracts

 

Post-Modification Outstanding Recorded Investment

 

Pre-Modification Outstanding Recorded Investment

 

Recorded Investment

2012

 

 

 

 

 

 

 

 

  Troubled debt restructurings:

 

 

 

 

 

 

 

 

Commercial real estate

 

2

 

 

$

5,225

 

 

$

5,225

 

 

$

5,099

 

     Residential mortgage

 

1

 

 

336

 

 

336

 

 

321

 

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due.

The following table presents the classes of the loan portfolio summarized by the past due status as of December 31, 2012 and 2011:

 

In thousands

30-59 Days

Past Due

 

60-89 Days

Past Due

 

Greater Than

90 Days

 

Total Past Due

 

Current

 

Total Loans

Receivable

 

Loans

Receivable

>90 Days and

Accruing

December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

$

128

 

 

$

—

 

 

$

342

 

 

$

470

 

 

$

48,534

 

 

$

49,004

 

 

$

1

 

Commercial real estate

598

 

 

—

 

 

4,478

 

 

5,076

 

 

237,943

 

 

243,019

 

 

6

 

Commercial real estate construction

—

 

 

—

 

 

854

 

 

854

 

 

18,300

 

 

19,154

 

 

—

 

Residential mortgage

4,197

 

 

2,425

 

 

1,381

 

 

8,003

 

 

320,833

 

 

328,836

 

 

764

 

Home equity lines of credit

353

 

 

10

 

 

43

 

 

406

 

 

52,724

 

 

53,130

 

 

—

 

Consumer

8

 

 

4

 

 

—

 

 

12

 

 

14,981

 

 

14,993

 

 

—

 

Total

$

5,284

 

 

$

2,439

 

 

$

7,098

 

 

$

14,821

 

 

$

693,315

 

 

$

708,136

 

 

$

771

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

$

25

 

 

$

14

 

 

$

2,219

 

 

$

2,258

 

 

$

53,887

 

 

$

56,145

 

 

$

—

 

Commercial real estate

329

 

 

4,184

 

 

6,663

 

 

11,176

 

 

224,841

 

 

236,017

 

 

51

 

Commercial real estate construction

—

 

 

—

 

 

2,614

 

 

2,614

 

 

20,143

 

 

22,757

 

 

—

 

Residential mortgage

4,585

 

 

1,395

 

 

2,378

 

 

8,358

 

 

302,908

 

 

311,266

 

 

977

 

Home equity lines of credit

397

 

 

—

 

 

163

 

 

560

 

 

51,972

 

 

52,532

 

 

163

 

Consumer

20

 

 

8

 

 

—

 

 

28

 

 

15,723

 

 

15,751

 

 

—

 

Total

$

5,356

 

 

$

5,601

 

 

$

14,037

 

 

$

24,994

 

 

$

669,474

 

 

$

694,468

 

 

$

1,191

 

 

The following table summarizes the allowance for loan losses and recorded investment in financing receivables:

 

In thousands

Commercial

and Industrial

 

Commercial

Real Estate

 

Commercial

Real Estate

Construction

 

Residential

Mortgage

 

Home Equity

Lines of Credit

 

Consumer

 

Unallocated

 

Total

December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance- January 1, 2012

$

2,582

 

 

$

6,007

 

 

$

548

 

 

$

3,624

 

 

$

507

 

 

$

419

 

 

$

1,795

 

 

$

15,482

 

Charge-offs

(2,180

)

 

(417

)

 

(538

)

 

(500

)

 

(51

)

 

(71

)

 

—

 

 

(3,757

)

Recoveries

22

 

 

250

 

 

149

 

 

1

 

 

—

 

 

3

 

 

—

 

 

425

 

Provisions

1,083

 

 

736

 

 

359

 

 

596

 

 

61

 

 

282

 

 

1,558

 

 

4,675

 

Ending balance- December 31, 2012

$

1,507

 

 

$

6,576

 

 

$

518

 

 

$

3,721

 

 

$

517

 

 

$

633

 

 

$

3,353

 

 

$

16,825

 

Ending balance: individually evaluated for impairment

$

29

 

 

$

7

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

36

 

Ending balance: collectively evaluated for impairment

$

1,478

 

 

$

6,569

 

 

$

518

 

 

$

3,721

 

 

$

517

 

 

$

633

 

 

$

3,353

 

 

$

16,789

 

Loans receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance

$

49,004

 

 

$

243,019

 

 

$

19,154

 

 

$

328,836

 

 

$

53,130

 

 

$

14,993

 

 

$

—

 

 

$

708,136

 

Ending balance: individually evaluated for impairment

$

341

 

 

$

9,009

 

 

$

854

 

 

$

938

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

11,142

 

Ending balance: collectively evaluated for impairment

$

48,663

 

 

$

234,010

 

 

$

18,300

 

 

$

327,898

 

 

$

53,130

 

 

$

14,993

 

 

$

—

 

 

$

696,994

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance- January 1, 2011

$

2,074

 

 

$

6,346

 

 

$

1,154

 

 

$

3,108

 

 

$

341

 

 

$

520

 

 

$

1,709

 

 

$

15,252

 

Charge-offs

(1,861

)

 

(1,308

)

 

(1,242

)

 

(750

)

 

(52

)

 

(30

)

 

—

 

 

(5,243

)

Recoveries

34

 

 

—

 

 

—

 

 

2

 

 

—

 

 

2

 

 

—

 

 

38

 

Provisions

2,335

 

 

969

 

 

636

 

 

1,264

 

 

218

 

 

(73

)

 

86

 

 

5,435

 

Ending balance- December 31, 2011

$

2,582

 

 

$

6,007

 

 

$

548

 

 

$

3,624

 

 

$

507

 

 

$

419

 

 

$

1,795

 

 

$

15,482

 

Ending balance: individually evaluated for impairment

$

1,085

 

 

$

43

 

 

$

—

 

 

$

53

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1,181

 

Ending balance: collectively evaluated for impairment

$

1,497

 

 

$

5,964

 

 

$

548

 

 

$

3,571

 

 

$

507

 

 

$

419

 

 

$

1,795

 

 

$

14,301

 

Loans receivables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance

$

56,145

 

 

$

236,017

 

 

$

22,757

 

 

$

311,266

 

 

$

52,532

 

 

$

15,751

 

 

$

—

 

 

$

694,468

 

Ending balance: individually evaluated for impairment

$

2,219

 

 

$

6,612

 

 

$

2,614

 

 

$

1,401

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

12,846

 

Ending balance: collectively evaluated for impairment

$

53,926

 

 

$

229,405

 

 

$

20,143

 

 

$

309,865

 

 

$

52,532

 

 

$

15,751

 

 

$

—

 

 

$

681,622

 

 

 

Changes in the allowance for loan losses were as follows:

 

 

Years Ended December 31,

In thousands

2012

 

2011

 

2010

Balance, beginning

$

15,482

 

 

$

15,252

 

 

$

11,981

 

Provision charged to operations

4,675

 

 

5,435

 

 

6,410

 

Recoveries on charged-off loans

425

 

 

38

 

 

42

 

Loans charged-off

(3,757

)

 

(5,243

)

 

(3,181

)

Balance, ending

$

16,825

 

 

$

15,482

 

 

$

15,252

 

 The Bank has granted loans to certain of its executive officers, directors and their related interests. These loans were made on substantially the same basis, including interests rates and collateral as those prevailing for comparable transactions with other borrowers at the same time. The aggregate amount of these loans was $12,351,000 and $10,318,000 at December 31, 2012 and 2011, respectively. During 2012, $4,064,000 of new loans and advances were extended and repayments totaled $2,031,000. None of these loans were past due, in nonaccrual status, or restructured at December 31, 2012.