MAINE | 01-0413282 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
2 ELM STREET, CAMDEN, ME | 04843 |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer ¨ | Accelerated filer x |
Non-accelerated filer ¨ | Smaller reporting company ¨ |
(Do not check if a smaller reporting company) |
PAGE | ||
PART I. FINANCIAL INFORMATION | ||
ITEM 1. | FINANCIAL STATEMENTS | |
Report of Independent Registered Public Accounting Firm | ||
Consolidated Statements of Condition - June 30, 2013 and December 31, 2012 | ||
Consolidated Statements of Income - Three and Six Months Ended June 30, 2013 and 2012 | ||
Consolidated Statements of Comprehensive Income (Loss) - Three and Six Months Ended June 30, 2013 and 2012 | ||
Consolidated Statements of Changes in Shareholders’ Equity - Six Months Ended June 30, 2013 and 2012 | ||
Consolidated Statements of Cash Flows - Six Months Ended June 30, 2013 and 2012 | ||
Notes to Consolidated Financial Statements | ||
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK | |
ITEM 4. | CONTROLS AND PROCEDURES | |
PART II. OTHER INFORMATION | ||
ITEM 1. | LEGAL PROCEEDINGS | |
ITEM 1A. | RISK FACTORS | |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | |
ITEM 4. | MINE SAFETY DISCLOSURES | |
ITEM 5. | OTHER INFORMATION | |
ITEM 6. | EXHIBITS | |
SIGNATURES | ||
EXHIBIT INDEX | ||
EXHIBITS |
/s/ Berry Dunn McNeil & Parker, LLC | |
Berry Dunn McNeil & Parker, LLC |
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION | ||||||||
June 30, 2013 | December 31, 2012 | |||||||
(In Thousands, Except Number of Shares) | (unaudited) | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 44,896 | $ | 58,290 | ||||
Securities | ||||||||
Securities available-for-sale, at fair value | 789,369 | 781,050 | ||||||
Federal Home Loan Bank and Federal Reserve Bank stock, at cost | 19,724 | 21,034 | ||||||
Total securities | 809,093 | 802,084 | ||||||
Trading account assets | 2,281 | 2,300 | ||||||
Loans held for sale | 2,826 | — | ||||||
Loans | 1,602,559 | 1,563,866 | ||||||
Less allowance for loan losses | (23,321 | ) | (23,044 | ) | ||||
Net loans | 1,579,238 | 1,540,822 | ||||||
Goodwill and other intangible assets | 52,725 | 53,299 | ||||||
Bank-owned life insurance | 45,705 | 45,053 | ||||||
Premises and equipment, net | 26,890 | 28,059 | ||||||
Deferred tax asset | 13,962 | 7,663 | ||||||
Interest receivable | 6,506 | 6,215 | ||||||
Other real estate owned | 2,155 | 1,313 | ||||||
Other assets | 15,501 | 19,659 | ||||||
Total assets | $ | 2,601,778 | $ | 2,564,757 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Liabilities | ||||||||
Deposits | ||||||||
Demand | $ | 232,535 | $ | 240,749 | ||||
Interest checking, savings and money market | 1,160,933 | 1,169,148 | ||||||
Retail certificates of deposit | 393,158 | 418,442 | ||||||
Brokered deposits | 107,461 | 101,130 | ||||||
Total deposits | 1,894,087 | 1,929,469 | ||||||
Federal Home Loan Bank advances | 186,147 | 56,404 | ||||||
Other borrowed funds | 218,318 | 259,940 | ||||||
Junior subordinated debentures | 43,870 | 43,819 | ||||||
Accrued interest and other liabilities | 29,736 | 41,310 | ||||||
Total liabilities | 2,372,158 | 2,330,942 | ||||||
Shareholders’ Equity | ||||||||
Common stock, no par value; authorized 20,000,000 shares, issued and outstanding 7,640,712 and 7,622,750 shares on June 30, 2013 and December 31, 2012, respectively | 49,909 | 49,667 | ||||||
Retained earnings | 189,007 | 181,151 | ||||||
Accumulated other comprehensive income (loss) | ||||||||
Net unrealized (losses) gains on securities available-for-sale, net of tax | (2,590 | ) | 12,943 | |||||
Net unrealized losses on derivative instruments, at fair value, net of tax | (4,059 | ) | (7,205 | ) | ||||
Net unrecognized losses on postretirement plans, net of tax | (2,647 | ) | (2,741 | ) | ||||
Total accumulated other comprehensive income (loss) | (9,296 | ) | 2,997 | |||||
Total shareholders’ equity | 229,620 | 233,815 | ||||||
Total liabilities and shareholders’ equity | $ | 2,601,778 | $ | 2,564,757 |
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In Thousands, Except Number of Shares and Per Share Data) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Interest Income | ||||||||||||||||
Interest and fees on loans | $ | 18,059 | $ | 18,268 | $ | 35,854 | $ | 36,703 | ||||||||
Interest on U.S. government and sponsored enterprise obligations | 4,074 | 4,118 | 8,350 | 8,234 | ||||||||||||
Interest on state and political subdivision obligations | 292 | 355 | 597 | 720 | ||||||||||||
Interest on federal funds sold and other investments | 56 | 56 | 106 | 105 | ||||||||||||
Total interest income | 22,481 | 22,797 | 44,907 | 45,762 | ||||||||||||
Interest Expense | ||||||||||||||||
Interest on deposits | 1,828 | 2,390 | 3,647 | 4,928 | ||||||||||||
Interest on borrowings | 767 | 1,409 | 1,585 | 2,827 | ||||||||||||
Interest on junior subordinated debentures | 636 | 632 | 1,257 | 1,270 | ||||||||||||
Total interest expense | 3,231 | 4,431 | 6,489 | 9,025 | ||||||||||||
Net interest income | 19,250 | 18,366 | 38,418 | 36,737 | ||||||||||||
Provision for credit losses | 695 | 835 | 1,369 | 1,840 | ||||||||||||
Net interest income after provision for credit losses | 18,555 | 17,531 | 37,049 | 34,897 | ||||||||||||
Non-Interest Income | ||||||||||||||||
Service charges on deposit accounts | 1,755 | 1,315 | 3,439 | 2,471 | ||||||||||||
Other service charges and fees | 1,513 | 956 | 2,942 | 1,801 | ||||||||||||
Income from fiduciary services | 1,275 | 1,289 | 2,418 | 2,728 | ||||||||||||
Mortgage banking income, net | 584 | 132 | 1,158 | 468 | ||||||||||||
Brokerage and insurance commissions | 409 | 410 | 821 | 749 | ||||||||||||
Bank-owned life insurance | 314 | 342 | 652 | 681 | ||||||||||||
Net gain on sale of securities and other-than-temporary impairment of securities | — | 751 | 138 | 872 | ||||||||||||
Other income | 526 | 559 | 1,144 | 1,212 | ||||||||||||
Total non-interest income | 6,376 | 5,754 | 12,712 | 10,982 | ||||||||||||
Non-Interest Expenses | ||||||||||||||||
Salaries and employee benefits | 7,961 | 6,972 | 16,322 | 13,880 | ||||||||||||
Furniture, equipment and data processing | 1,931 | 1,295 | 3,535 | 2,518 | ||||||||||||
Net occupancy | 1,407 | 1,020 | 2,959 | 2,131 | ||||||||||||
Other real estate owned and collection costs (recoveries), net | (22 | ) | 497 | 866 | 1,123 | |||||||||||
Consulting and professional fees | 585 | 608 | 1,132 | 1,098 | ||||||||||||
Regulatory assessments | 500 | 432 | 999 | 867 | ||||||||||||
Amortization of intangible assets | 287 | 145 | 574 | 289 | ||||||||||||
Branch acquisition/divestiture costs | 71 | — | 232 | — | ||||||||||||
Other expenses | 2,928 | 3,010 | 5,529 | 4,992 | ||||||||||||
Total non-interest expenses | 15,648 | 13,979 | 32,148 | 26,898 | ||||||||||||
Income before income taxes | 9,283 | 9,306 | 17,613 | 18,981 | ||||||||||||
Income Taxes | 2,952 | 2,894 | 5,620 | 5,986 | ||||||||||||
Net Income | $ | 6,331 | $ | 6,412 | $ | 11,993 | $ | 12,995 | ||||||||
Per Share Data | ||||||||||||||||
Basic earnings per share | $ | 0.83 | $ | 0.84 | $ | 1.57 | $ | 1.69 | ||||||||
Diluted earnings per share | $ | 0.82 | $ | 0.83 | $ | 1.56 | $ | 1.69 | ||||||||
Weighted average number of common shares outstanding | 7,637,433 | 7,675,819 | 7,632,586 | 7,673,927 | ||||||||||||
Diluted weighted average number of common shares outstanding | 7,652,199 | 7,687,620 | 7,646,742 | 7,686,747 |
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In Thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income | $ | 6,331 | $ | 6,412 | $ | 11,993 | $ | 12,995 | ||||||||
Other comprehensive income (loss), net of related tax effects: | ||||||||||||||||
Unrealized (losses) gains on securities available-for-sale: | ||||||||||||||||
Unrealized holding (losses) gains on securities available-for-sale arising during period, net of related tax effects of $6,808, ($1,475), $8,315 and ($819), respectively | (12,644 | ) | 2,740 | (15,443 | ) | 1,521 | ||||||||||
Less: reclassification adjustment for gains included in net income, net of related tax effects of $0, $263, $48 and $305, respectively | — | (488 | ) | (90 | ) | (567 | ) | |||||||||
Net unrealized gains (losses) on securities available-for-sale | (12,644 | ) | 2,252 | (15,533 | ) | 954 | ||||||||||
Unrealized gain (loss) on cash flow hedging derivatives, net of related tax effects of ($1,236), $1,227, ($1,694) and $406, respectively | 2,296 | (2,279 | ) | 3,146 | (754 | ) | ||||||||||
Postretirement plans: | ||||||||||||||||
Net actuarial gain arising during period, net of related tax effects of ($21), ($13), ($42) and ($26), respectively | 40 | 24 | 79 | 48 | ||||||||||||
Plus: amortization of prior service cost included in net periodic cost, net of related tax effects of ($4), ($2) ($8) and ($3)(1), respectively | 7 | 3 | 15 | 6 | ||||||||||||
Other comprehensive income (loss) | (10,301 | ) | — | (12,293 | ) | 254 | ||||||||||
Comprehensive income (loss) | $ | (3,970 | ) | $ | 6,412 | $ | (300 | ) | $ | 13,249 |
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited) | |||||||||||||||||||
Common Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||
(In Thousands, Except Number of Shares and Per Share Data) | Shares Outstanding | Amount | Retained Earnings | ||||||||||||||||
Balance at December 31, 2011 | 7,664,975 | $ | 51,438 | $ | 165,377 | $ | 2,061 | $ | 218,876 | ||||||||||
Net income | — | — | 12,995 | — | 12,995 | ||||||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||
Change in fair value of securities available-for-sale | — | — | — | 954 | 954 | ||||||||||||||
Change in fair value of cash flow hedges | — | — | — | (754 | ) | (754 | ) | ||||||||||||
Change in net unrecognized losses on postretirement plans | — | — | — | 54 | 54 | ||||||||||||||
Total comprehensive income | — | — | 12,995 | 254 | 13,249 | ||||||||||||||
Stock-based compensation expense | — | 172 | — | — | 172 | ||||||||||||||
Exercise of stock options and issuance of restricted stock, net of repurchase for tax withholdings and tax benefit | 19,614 | (240 | ) | — | — | (240 | ) | ||||||||||||
Common stock repurchased | (65,580 | ) | (2,097 | ) | — | — | (2,097 | ) | |||||||||||
Cash dividends declared ($0.50 per share) | — | — | (3,872 | ) | — | (3,872 | ) | ||||||||||||
Balance at June 30, 2012 | 7,619,009 | $ | 49,273 | $ | 174,500 | $ | 2,315 | $ | 226,088 | ||||||||||
Balance at December 31, 2012 | 7,622,750 | $ | 49,667 | $ | 181,151 | $ | 2,997 | $ | 233,815 | ||||||||||
Net income | — | — | 11,993 | — | 11,993 | ||||||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||
Change in fair value of securities available-for-sale | — | — | — | (15,533 | ) | (15,533 | ) | ||||||||||||
Change in fair value of cash flow hedges | — | — | — | 3,146 | 3,146 | ||||||||||||||
Change in net unrecognized losses on postretirement plans | — | — | — | 94 | 94 | ||||||||||||||
Total comprehensive loss | — | — | 11,993 | (12,293 | ) | (300 | ) | ||||||||||||
Stock-based compensation expense | — | 159 | — | — | 159 | ||||||||||||||
Exercise of stock options and issuance of restricted stock, net of repurchase for tax withholdings and tax benefit | 17,962 | 83 | — | — | 83 | ||||||||||||||
Cash dividends declared ($0.54 per share) | — | — | (4,137 | ) | — | (4,137 | ) | ||||||||||||
Balance at June 30, 2013 | 7,640,712 | $ | 49,909 | $ | 189,007 | $ | (9,296 | ) | $ | 229,620 |
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | ||||||||
Six Months Ended June 30, | ||||||||
(In Thousands) | 2013 | 2012 | ||||||
Operating Activities | ||||||||
Net income | $ | 11,993 | $ | 12,995 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for credit losses | 1,369 | 1,840 | ||||||
Depreciation and amortization | 2,799 | 2,139 | ||||||
Stock-based compensation expense | 159 | 172 | ||||||
Increase in interest receivable | (291 | ) | (99 | ) | ||||
Amortization of intangible assets | 574 | 289 | ||||||
Net decrease in trading assets | 19 | 60 | ||||||
Net investment securities gains and other-than-temporary impairment of securities | (138 | ) | (872 | ) | ||||
Increase in other real estate owned valuation allowance and loss on disposition | 31 | 247 | ||||||
Originations of mortgage loans held for sale | (21,510 | ) | (12,775 | ) | ||||
Proceeds from the sale of mortgage loans | 19,336 | 19,104 | ||||||
Gain on sale of mortgage loans | (652 | ) | (268 | ) | ||||
Decrease in prepaid FDIC assessment | 3,606 | 575 | ||||||
(Increase) decrease in other assets | (376 | ) | 1,034 | |||||
(Decrease) increase in other liabilities | (3,456 | ) | 1,099 | |||||
Net cash provided by operating activities | 13,463 | 25,540 | ||||||
Investing Activities | ||||||||
Proceeds from sales and maturities of securities available-for-sale | 75,669 | 110,644 | ||||||
Purchase of securities available-for-sale | (108,954 | ) | (196,419 | ) | ||||
Net increase in loans | (40,340 | ) | (25,585 | ) | ||||
Proceeds from sale of Federal Home Loan Bank stock | 1,310 | 928 | ||||||
Proceeds from the sale of other real estate owned | 103 | 627 | ||||||
Proceeds from previously charge-off loans | 325 | 384 | ||||||
Cash settlement in branch acquisition | (3,278 | ) | — | |||||
Purchase of premises and equipment | (586 | ) | (968 | ) | ||||
Net cash used by investing activities | (75,751 | ) | (110,389 | ) | ||||
Financing Activities | ||||||||
Net (decrease) increase in deposits | (35,382 | ) | 10,496 | |||||
Repayments on Federal Home Loan Bank long-term advances | (257 | ) | (243 | ) | ||||
Net change in short-term Federal Home Loan Bank borrowings | 148,100 | 125,000 | ||||||
Net decrease in other borrowed funds | (59,672 | ) | (43,068 | ) | ||||
Common stock repurchase | — | (2,097 | ) | |||||
Exercise of stock options and issuance of restricted stock, net of repurchase for tax withholdings and tax benefit | 83 | (240 | ) | |||||
Cash dividends paid on common stock | (3,978 | ) | (3,846 | ) | ||||
Net cash provided by financing activities | 48,894 | 86,002 | ||||||
Net (decrease) increase in cash and cash equivalents | (13,394 | ) | 1,153 | |||||
Cash and cash equivalents at beginning of year | 58,290 | 39,325 | ||||||
Cash and cash equivalents at end of period | $ | 44,896 | $ | 40,478 | ||||
Supplemental information | ||||||||
Interest paid | $ | 6,765 | $ | 9,190 | ||||
Income taxes paid | 5,400 | 3,322 | ||||||
Transfer from loans to other real estate owned | 976 | 889 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net income | $ | 6,331 | $ | 6,412 | $ | 11,993 | $ | 12,995 | ||||||||
Dividends and undistributed earnings allocated to participating securities (1) | (20 | ) | (18 | ) | (30 | ) | (30 | ) | ||||||||
Net income available to common shareholders | $ | 6,311 | $ | 6,394 | $ | 11,963 | $ | 12,965 | ||||||||
Weighted-average common shares outstanding for basic EPS | 7,637,433 | 7,675,819 | 7,632,586 | 7,673,927 | ||||||||||||
Dilutive effect of stock-based awards (2) | 14,766 | 11,801 | 14,156 | 12,820 | ||||||||||||
Weighted-average common and potential common shares for diluted EPS | 7,652,199 | 7,687,620 | 7,646,742 | 7,686,747 | ||||||||||||
Earnings per common share: | ||||||||||||||||
Basic EPS | $ | 0.83 | $ | 0.84 | $ | 1.57 | $ | 1.69 | ||||||||
Diluted EPS | $ | 0.82 | $ | 0.83 | $ | 1.56 | $ | 1.69 |
(1) | Represents dividends paid and undistributed earnings allocated to nonvested restricted stock awards. |
(2) | Represents the effect of the assumed exercise of stock options, vesting of restricted shares, and vesting of restricted stock units, based on the treasury stock method. |
Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
June 30, 2013 | |||||||||||||||
Obligations of states and political subdivisions | $ | 29,079 | $ | 1,410 | $ | — | $ | 30,489 | |||||||
Mortgage-backed securities issued or guaranteed by U.S. government sponsored enterprises | 347,342 | 6,837 | (5,401 | ) | 348,778 | ||||||||||
Collateralized mortgage obligations issued or guaranteed by U.S. government sponsored enterprises | 408,826 | 1,271 | (7,840 | ) | 402,257 | ||||||||||
Private issue collateralized mortgage obligations | 8,106 | 12 | (273 | ) | 7,845 | ||||||||||
Total securities available-for-sale | $ | 793,353 | $ | 9,530 | $ | (13,514 | ) | $ | 789,369 | ||||||
December 31, 2012 | |||||||||||||||
Obligations of states and political subdivisions | $ | 31,112 | $ | 1,928 | $ | — | $ | 33,040 | |||||||
Mortgage-backed securities issued or guaranteed by U.S. government sponsored enterprises | 345,528 | 12,699 | (79 | ) | 358,148 | ||||||||||
Collateralized mortgage obligations issued or guaranteed by U.S. government sponsored enterprises | 375,627 | 6,181 | (120 | ) | 381,688 | ||||||||||
Private issue collateralized mortgage obligations | 8,871 | — | (697 | ) | 8,174 | ||||||||||
Total securities available-for-sale | $ | 761,138 | $ | 20,808 | $ | (896 | ) | $ | 781,050 |
Less Than 12 Months | 12 Months or More | Total | |||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
June 30, 2013 | |||||||||||||||||||||||
Mortgage-backed securities | $ | 171,566 | $ | (5,401 | ) | $ | — | $ | — | $ | 171,566 | $ | (5,401 | ) | |||||||||
Collateralized mortgage obligations | 298,708 | (7,840 | ) | — | — | 298,708 | (7,840 | ) | |||||||||||||||
Private issue collateralized mortgage obligations | 139 | (5 | ) | 5,985 | (268 | ) | 6,124 | (273 | ) | ||||||||||||||
Total | $ | 470,413 | $ | (13,246 | ) | $ | 5,985 | $ | (268 | ) | $ | 476,398 | $ | (13,514 | ) | ||||||||
December 31, 2012 | |||||||||||||||||||||||
Mortgage-backed securities | $ | 42,782 | $ | (79 | ) | $ | — | $ | — | $ | 42,782 | $ | (79 | ) | |||||||||
Collateralized mortgage obligations | 73,098 | (120 | ) | — | — | 73,098 | (120 | ) | |||||||||||||||
Private issue collateralized mortgage obligations | — | — | 8,174 | (697 | ) | 8,174 | (697 | ) | |||||||||||||||
Total | $ | 115,880 | $ | (199 | ) | $ | 8,174 | $ | (697 | ) | $ | 124,054 | $ | (896 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Available-for-sale | 2013 | 2012 | 2013 | 2012 | |||||||||||
Proceeds from sales of securities | $ | — | $ | 18,324 | $ | 4,875 | $ | 31,364 | |||||||
Gross realized gains | — | 951 | 138 | 1,104 | |||||||||||
Gross realized (losses) | — | (200 | ) | — | (203 | ) | |||||||||
Other-than-temporary impairment of securities | — | — | — | (29 | ) |
Available-for-sale | Amortized Cost | Fair Value | |||||
Due in one year or less | $ | 1,881 | $ | 1,924 | |||
Due after one year through five years | 25,541 | 26,278 | |||||
Due after five years through ten years | 129,625 | 130,554 | |||||
Due after ten years | 636,306 | 630,613 | |||||
$ | 793,353 | $ | 789,369 |
June 30, 2013 | December 31, 2012 | ||||||
Residential real estate loans | $ | 570,011 | $ | 572,768 | |||
Commercial real estate loans | 522,987 | 506,231 | |||||
Commercial loans | 190,068 | 190,454 | |||||
Home equity loans | 301,868 | 278,375 | |||||
Consumer loans | 18,115 | 16,633 | |||||
Deferred loan fees net of costs | (490 | ) | (595 | ) | |||
Total loans | $ | 1,602,559 | $ | 1,563,866 |
Residential Real Estate | Commercial Real Estate | Commercial | Home Equity | Consumer | Unallocated | Total | |||||||||||||||||||||
ALL: | |||||||||||||||||||||||||||
Beginning balance | $ | 7,269 | $ | 3,602 | $ | 6,200 | $ | 3,358 | $ | 222 | $ | 2,718 | $ | 23,369 | |||||||||||||
Loans charged off | (202 | ) | (91 | ) | (167 | ) | (309 | ) | (76 | ) | — | (845 | ) | ||||||||||||||
Recoveries | 2 | 17 | 69 | — | 9 | — | 97 | ||||||||||||||||||||
Provision (reduction) | (837 | ) | 62 | (314 | ) | 379 | 66 | 1,344 | 700 | ||||||||||||||||||
Ending balance | $ | 6,232 | $ | 3,590 | $ | 5,788 | $ | 3,428 | $ | 221 | $ | 4,062 | $ | 23,321 |
Residential Real Estate | Commercial Real Estate | Commercial | Home Equity | Consumer | Unallocated | Total | |||||||||||||||||||||
ALL: | |||||||||||||||||||||||||||
Beginning balance | $ | 6,996 | $ | 4,549 | $ | 5,933 | $ | 2,520 | $ | 184 | $ | 2,862 | $ | 23,044 | |||||||||||||
Loans charged off | (347 | ) | (171 | ) | (444 | ) | (337 | ) | (133 | ) | — | (1,432 | ) | ||||||||||||||
Recoveries | 5 | 92 | 198 | 2 | 28 | — | 325 | ||||||||||||||||||||
Provision (reduction) | (422 | ) | (880 | ) | 101 | 1,243 | 142 | 1,200 | 1,384 | ||||||||||||||||||
Ending balance | $ | 6,232 | $ | 3,590 | $ | 5,788 | $ | 3,428 | $ | 221 | $ | 4,062 | $ | 23,321 | |||||||||||||
ALL balance attributable to loans: | |||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 1,487 | $ | 296 | $ | 386 | $ | 442 | $ | 71 | $ | — | $ | 2,682 | |||||||||||||
Collectively evaluated for impairment | 4,745 | 3,294 | 5,402 | 2,986 | 150 | 4,062 | 20,639 | ||||||||||||||||||||
Total ending ALL | $ | 6,232 | $ | 3,590 | $ | 5,788 | $ | 3,428 | $ | 221 | $ | 4,062 | $ | 23,321 | |||||||||||||
Loans: | |||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 12,099 | $ | 8,479 | $ | 3,612 | $ | 1,526 | $ | 421 | $ | — | $ | 26,137 | |||||||||||||
Collectively evaluated for impairment | 557,422 | 514,508 | 186,456 | 300,342 | 17,694 | — | 1,576,422 | ||||||||||||||||||||
Total ending loans balance | $ | 569,521 | $ | 522,987 | $ | 190,068 | $ | 301,868 | $ | 18,115 | $ | — | $ | 1,602,559 |
Residential Real Estate | Commercial Real Estate | Commercial | Home Equity | Consumer | Unallocated | Total | |||||||||||||||||||||
ALL: | |||||||||||||||||||||||||||
Beginning balance | $ | 6,103 | $ | 5,713 | $ | 5,193 | $ | 2,474 | $ | 523 | $ | 3,004 | $ | 23,010 | |||||||||||||
Loans charged off | (138 | ) | (30 | ) | (225 | ) | (464 | ) | (4 | ) | — | (861 | ) | ||||||||||||||
Recoveries | 63 | 145 | 56 | 20 | 3 | — | 287 | ||||||||||||||||||||
Provision (reduction) | 324 | (991 | ) | 1,344 | 289 | (358 | ) | 218 | 826 | ||||||||||||||||||
Ending balance | $ | 6,352 | $ | 4,837 | $ | 6,368 | $ | 2,319 | $ | 164 | $ | 3,222 | $ | 23,262 |
Residential Real Estate | Commercial Real Estate | Commercial | Home Equity | Consumer | Unallocated | Total | |||||||||||||||||||||
ALL: | |||||||||||||||||||||||||||
Beginning balance | $ | 6,398 | $ | 5,702 | $ | 4,846 | $ | 2,704 | $ | 420 | $ | 2,941 | $ | 23,011 | |||||||||||||
Loans charged off | (446 | ) | (209 | ) | (416 | ) | (851 | ) | (28 | ) | — | (1,950 | ) | ||||||||||||||
Recoveries | 68 | 166 | 120 | 20 | 10 | — | 384 | ||||||||||||||||||||
Provision (reduction) | 332 | (822 | ) | 1,818 | 446 | (238 | ) | 281 | 1,817 | ||||||||||||||||||
Ending balance | $ | 6,352 | $ | 4,837 | $ | 6,368 | $ | 2,319 | $ | 164 | $ | 3,222 | $ | 23,262 | |||||||||||||
ALL balance attributable to loans: | |||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 1,903 | $ | 707 | $ | 933 | $ | 203 | $ | 39 | $ | — | $ | 3,785 | |||||||||||||
Collectively evaluated for impairment | 4,449 | 4,130 | 5,435 | 2,116 | 125 | 3,222 | 19,477 | ||||||||||||||||||||
Total ending ALL | $ | 6,352 | $ | 4,837 | $ | 6,368 | $ | 2,319 | $ | 164 | $ | 3,222 | $ | 23,262 | |||||||||||||
Loans: | |||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 13,458 | $ | 7,362 | $ | 4,751 | $ | 1,651 | $ | 263 | $ | — | $ | 27,485 | |||||||||||||
Collectively evaluated for impairment | 556,365 | 489,049 | 177,677 | 270,658 | 15,230 | — | 1,508,979 | ||||||||||||||||||||
Total ending loans balance | $ | 569,823 | $ | 496,411 | $ | 182,428 | $ | 272,309 | $ | 15,493 | $ | — | $ | 1,536,464 |
Residential Real Estate | Commercial Real Estate | Commercial | Home Equity | Consumer | Unallocated | Total | |||||||||||||||||||||
ALL: | |||||||||||||||||||||||||||
Beginning balance | $ | 6,398 | $ | 5,702 | $ | 4,846 | $ | 2,704 | $ | 420 | $ | 2,941 | $ | 23,011 | |||||||||||||
Loans charged off | (1,197 | ) | (593 | ) | (1,393 | ) | (1,234 | ) | (85 | ) | — | (4,502 | ) | ||||||||||||||
Recoveries | 73 | 222 | 406 | 23 | 20 | — | 744 | ||||||||||||||||||||
Provision (reduction) | 1,722 | (782 | ) | 2,074 | 1,027 | (171 | ) | (79 | ) | 3,791 | |||||||||||||||||
Ending balance | $ | 6,996 | $ | 4,549 | $ | 5,933 | $ | 2,520 | $ | 184 | $ | 2,862 | $ | 23,044 | |||||||||||||
ALL balance attributable to loans: | |||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 2,255 | $ | 265 | $ | 286 | $ | 261 | $ | 39 | $ | — | $ | 3,106 | |||||||||||||
Collectively evaluated for impairment | 4,741 | 4,284 | 5,647 | 2,259 | 145 | 2,862 | 19,938 | ||||||||||||||||||||
Total ending ALL | $ | 6,996 | $ | 4,549 | $ | 5,933 | $ | 2,520 | $ | 184 | $ | 2,862 | $ | 23,044 | |||||||||||||
Loans: | |||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 13,805 | $ | 7,968 | $ | 3,610 | $ | 1,515 | $ | 259 | $ | — | $ | 27,157 | |||||||||||||
Collectively evaluated for impairment | 558,368 | 498,263 | 186,844 | 276,860 | 16,374 | — | 1,536,709 | ||||||||||||||||||||
Total ending loans balance | $ | 572,173 | $ | 506,231 | $ | 190,454 | $ | 278,375 | $ | 16,633 | $ | — | $ | 1,563,866 |
• | Grade 1 through 6 — Grades 1through 6 represent groups of loans that are not subject to adverse criticism as defined in regulatory guidance. Loans in these groups exhibit characteristics that represent low to moderate risks, which is measured using a variety of credit risk criteria, such as cash flow coverage, debt service coverage, balance sheet leverage, liquidity, management experience, industry position, prevailing economic conditions, support from secondary sources of repayment and other credit factors that may be relevant to a specific loan. In general, these loans are supported by properly margined collateral and guarantees of principal parties. |
• | Grade 7 — Loans with potential weakness (Special Mention). Loans in this category are currently protected based on collateral and repayment capacity and do not constitute undesirable credit risk, but have potential weakness that may result in deterioration of the repayment process at some future date. This classification is used if a negative trend is evident in the obligor’s financial situation. Special mention loans do not sufficiently expose the Company to warrant adverse classification. |
• | Grade 8 — Loans with definite weakness (Substandard). Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or by collateral pledged. This classification is used if borrowers experience difficulty in meeting debt repayment requirements. Deterioration is sufficient to cause the Company to look to the sale of collateral. |
• | Grade 9 — Loans with potential loss (Doubtful). Loans classified as doubtful have all the weaknesses inherent in the substandard grade with the added characteristic that the weaknesses make collection or liquidation of the loan in full highly questionable and improbable. The possibility of some loss is extremely high, but because of specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. |
• | Grade 10 — Loans with definite loss (Loss). Loans classified as loss are considered uncollectible. The loss classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the asset because recovery and collection time may be protracted. |
Residential Real Estate | Commercial Real Estate | Commercial | Home Equity | Consumer | |||||||||||||||
June 30, 2013 | |||||||||||||||||||
Pass (Grades 1-6) | $ | 553,040 | $ | 465,947 | $ | 169,208 | $ | — | $ | — | |||||||||
Performing | — | — | — | 300,343 | 17,695 | ||||||||||||||
Special Mention (Grade 7) | 2,771 | 13,400 | 7,919 | — | — | ||||||||||||||
Substandard (Grade 8) | 13,710 | 43,640 | 12,941 | — | — | ||||||||||||||
Non-performing | — | — | — | 1,525 | 420 | ||||||||||||||
Total | $ | 569,521 | $ | 522,987 | $ | 190,068 | $ | 301,868 | $ | 18,115 | |||||||||
December 31, 2012 | |||||||||||||||||||
Pass (Grades 1-6) | $ | 555,444 | $ | 440,610 | $ | 165,460 | $ | — | $ | — | |||||||||
Performing | — | — | — | 276,742 | 16,376 | ||||||||||||||
Special Mention (Grade 7) | 1,291 | 17,069 | 7,449 | — | — | ||||||||||||||
Substandard (Grade 8) | 15,438 | 48,552 | 17,545 | — | — | ||||||||||||||
Non-performing | — | — | — | 1,633 | 257 | ||||||||||||||
Total | $ | 572,173 | $ | 506,231 | $ | 190,454 | $ | 278,375 | $ | 16,633 |
30-59 Days Past Due | 60-89 Days Past Due | Greater than 90 Days | Total Past Due | Current | Total Loans Outstanding | Loans > 90 Days Past Due and Accruing | Non-Accrual Loans | ||||||||||||||||||||||||
June 30, 2013 | |||||||||||||||||||||||||||||||
Residential real estate | $ | 1,466 | $ | 671 | $ | 6,857 | $ | 8,994 | $ | 560,527 | $ | 569,521 | $ | — | $ | 8,624 | |||||||||||||||
Commercial real estate | 1,916 | 337 | 4,853 | 7,106 | 515,881 | 522,987 | — | 6,634 | |||||||||||||||||||||||
Commercial | 383 | 87 | 2,637 | 3,107 | 186,961 | 190,068 | — | 3,233 | |||||||||||||||||||||||
Home equity | 527 | 57 | 1,113 | 1,697 | 300,171 | 301,868 | — | 1,525 | |||||||||||||||||||||||
Consumer | 181 | 41 | 394 | 616 | 17,499 | 18,115 | — | 420 | |||||||||||||||||||||||
Total | $ | 4,473 | $ | 1,193 | $ | 15,854 | $ | 21,520 | $ | 1,581,039 | $ | 1,602,559 | $ | — | $ | 20,436 | |||||||||||||||
December 31, 2012 | |||||||||||||||||||||||||||||||
Residential real estate | $ | 1,459 | $ | 850 | $ | 8,410 | $ | 10,719 | $ | 561,454 | $ | 572,173 | $ | 193 | $ | 10,584 | |||||||||||||||
Commercial real estate | 896 | 2,227 | 5,380 | 8,503 | 497,728 | 506,231 | 138 | 6,719 | |||||||||||||||||||||||
Commercial | 1,079 | 68 | 2,969 | 4,116 | 186,338 | 190,454 | 160 | 3,409 | |||||||||||||||||||||||
Home equity | 2,230 | 355 | 1,105 | 3,690 | 274,685 | 278,375 | 118 | 1,514 | |||||||||||||||||||||||
Consumer | 342 | 199 | 259 | 800 | 15,833 | 16,633 | 2 | 257 | |||||||||||||||||||||||
Total | $ | 6,006 | $ | 3,699 | $ | 18,123 | $ | 27,828 | $ | 1,536,038 | $ | 1,563,866 | $ | 611 | $ | 22,483 |
Number of Contracts | Pre-Modification Outstanding Recorded Investment | Post-Modification Outstanding Recorded Investment | Current Balance | |||||||||||
June 30, 2013 | ||||||||||||||
Residential real estate | 22 | $ | 471 | $ | 471 | $ | 412 | |||||||
Commercial real estate | 9 | 2,844 | 2,897 | 2,714 | ||||||||||
Commercial | 6 | 3,581 | 3,719 | 3,540 | ||||||||||
Consumer | 1 | 3 | 3 | 1 | ||||||||||
Total | 38 | $ | 6,899 | $ | 7,090 | $ | 6,667 | |||||||
December 31, 2012 | ||||||||||||||
Residential real estate | 20 | $ | 3,305 | $ | 3,434 | $ | 3,286 | |||||||
Commercial real estate | 6 | 2,602 | 2,649 | 2,344 | ||||||||||
Commercial | 3 | 303 | 303 | 236 | ||||||||||
Consumer | 1 | 3 | 3 | 2 | ||||||||||
Total | 30 | $ | 6,213 | $ | 6,389 | $ | 5,868 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | |||||||||||||||||||||
June 30, 2013 | |||||||||||||||||||||||||||
With an allowance recorded: | |||||||||||||||||||||||||||
Residential real estate | $ | 9,491 | $ | 9,491 | $ | 1,487 | $ | 9,250 | $ | 30 | $ | 9,967 | $ | 59 | |||||||||||||
Commercial real estate | 4,047 | 4,047 | 296 | 4,082 | 6 | 4,213 | 9 | ||||||||||||||||||||
Commercial | 2,754 | 2,754 | 386 | 2,749 | 1 | 2,779 | 3 | ||||||||||||||||||||
Home equity | 1,243 | 1,243 | 442 | 1,148 | — | 1,338 | — | ||||||||||||||||||||
Consumer | 420 | 420 | 71 | 461 | — | 459 | — | ||||||||||||||||||||
Ending Balance | $ | 17,955 | $ | 17,955 | $ | 2,682 | $ | 17,690 | $ | 37 | $ | 18,756 | $ | 71 | |||||||||||||
Without allowance recorded: | |||||||||||||||||||||||||||
Residential real estate | $ | 2,608 | $ | 3,503 | $ | — | $ | 2,874 | $ | 6 | $ | 2,954 | $ | 13 | |||||||||||||
Commercial real estate | 4,432 | 4,705 | — | 4,072 | 24 | 3,794 | 46 | ||||||||||||||||||||
Commercial | 858 | 981 | — | 652 | 5 | 595 | 6 | ||||||||||||||||||||
Home equity | 283 | 483 | — | 412 | — | 388 | — | ||||||||||||||||||||
Consumer | 1 | 1 | — | 2 | — | 2 | — | ||||||||||||||||||||
Ending Balance | $ | 8,182 | $ | 9,673 | $ | — | $ | 8,012 | $ | 35 | $ | 7,733 | $ | 65 | |||||||||||||
Total impaired loans | $ | 26,137 | $ | 27,628 | $ | 2,682 | $ | 25,702 | $ | 72 | $ | 26,489 | $ | 136 |
Year Ended | |||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||||||
December 31, 2012 | |||||||||||||||||||
With related allowance recorded: | |||||||||||||||||||
Residential real estate | $ | 11,021 | $ | 11,021 | $ | 2,255 | $ | 10,585 | $ | 114 | |||||||||
Commercial real estate | 4,296 | 4,296 | 265 | 5,551 | — | ||||||||||||||
Commercial | 2,971 | 2,971 | 286 | 3,927 | — | ||||||||||||||
Home equity | 1,236 | 1,236 | 261 | 1,289 | — | ||||||||||||||
Consumer | 257 | 257 | 39 | 239 | — | ||||||||||||||
Ending Balance | $ | 19,781 | $ | 19,781 | $ | 3,106 | $ | 21,591 | $ | 114 | |||||||||
Without related allowance recorded: | |||||||||||||||||||
Residential real estate | $ | 2,784 | $ | 3,841 | $ | — | $ | 2,548 | $ | 26 | |||||||||
Commercial real estate | 3,672 | 4,127 | — | 2,056 | 33 | ||||||||||||||
Commercial | 639 | 956 | — | 389 | 13 | ||||||||||||||
Home equity | 279 | 550 | — | 617 | — | ||||||||||||||
Consumer | 2 | 2 | — | 6 | — | ||||||||||||||
Ending Balance | $ | 7,376 | $ | 9,476 | $ | — | $ | 5,616 | $ | 72 | |||||||||
Total impaired loans | $ | 27,157 | $ | 29,257 | $ | 3,106 | $ | 27,207 | $ | 186 |
Goodwill | |||||||||||
Banking | Financial Services | Total | |||||||||
Balance at December 31, 2012 | $ | 40,902 | $ | 6,734 | $ | 47,636 | |||||
2013 activity | — | — | — | ||||||||
Balance at June 30, 2013 | $ | 40,902 | $ | 6,734 | $ | 47,636 |
Core Deposit Intangible | Trust Relationship Intangible | ||||||||||||||||||||||
Total | Accumulated Amortization | Net | Total | Accumulated Amortization | Net | ||||||||||||||||||
Balance at December 31, 2012 | $ | 17,300 | $ | (12,014 | ) | $ | 5,286 | $ | 753 | $ | (376 | ) | $ | 377 | |||||||||
2013 amortization | — | (536 | ) | (536 | ) | — | (38 | ) | (38 | ) | |||||||||||||
Balance at June 30, 2013 | $ | 17,300 | $ | (12,550 | ) | $ | 4,750 | $ | 753 | $ | (414 | ) | $ | 339 |
Core Deposit Intangible | Trust Relationship Intangible | ||||||
2013 | $ | 788 | $ | 38 | |||
2014 | 1,073 | 75 | |||||
2015 | 1,073 | 75 | |||||
2016 | 1,073 | 75 | |||||
2017 | 743 | 76 | |||||
Total unamortized intangible assets | $ | 4,750 | $ | 339 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net period benefit cost | |||||||||||||||
Service cost | $ | 82 | $ | 67 | $ | 164 | $ | 134 | |||||||
Interest cost | 94 | 102 | 188 | 204 | |||||||||||
Recognized net actuarial loss | 56 | 29 | 112 | 58 | |||||||||||
Recognized prior service cost | 5 | 5 | 10 | 10 | |||||||||||
Net period benefit cost | $ | 237 | $ | 203 | $ | 474 | $ | 406 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net period benefit cost | |||||||||||||||
Service cost | $ | 19 | $ | 17 | $ | 38 | $ | 34 | |||||||
Interest cost | 35 | 37 | 70 | 74 | |||||||||||
Recognized net actuarial loss | 11 | 8 | 22 | 16 | |||||||||||
Net period benefit cost | $ | 65 | $ | 62 | $ | 130 | $ | 124 |
Readily Available Market Prices (Level 1) | Observable Market Data (Level 2) | Company Determined Fair Value (Level 3) | Total | ||||||||||||
June 30, 2013 | |||||||||||||||
Financial Assets: | |||||||||||||||
Available-for-sale debt securities: | |||||||||||||||
Obligations of states and political subdivisions | $ | — | $ | 30,489 | $ | — | $ | 30,489 | |||||||
Mortgage-backed securities issued or guaranteed by U.S. government sponsored enterprises | — | 348,778 | — | 348,778 | |||||||||||
Collateralized mortgage obligations issued or guaranteed by U.S. government sponsored enterprises | — | 402,257 | — | 402,257 | |||||||||||
Private issue collateralized mortgage obligations | — | 7,845 | — | 7,845 | |||||||||||
Trading account assets | 2,281 | — | — | 2,281 | |||||||||||
Loans held for sale | — | 2,826 | — | 2,826 | |||||||||||
Customer interest rate swap agreements | — | 193 | — | 193 | |||||||||||
Financial Liabilities: | |||||||||||||||
Interest rate swap agreements | — | 6,437 | — | 6,437 | |||||||||||
December 31, 2012 | |||||||||||||||
Financial Assets: | |||||||||||||||
Available-for-sale debt securities: | |||||||||||||||
Obligations of states and political subdivisions | $ | — | $ | 33,040 | $ | — | $ | 33,040 | |||||||
Mortgage-backed securities issued or guaranteed by U.S. government sponsored enterprises | — | 358,148 | — | 358,148 | |||||||||||
Collateralized mortgage obligations issued or guaranteed by U.S. government sponsored enterprises | — | 381,688 | — | 381,688 | |||||||||||
Private issue collateralized mortgage obligations | — | 8,174 | — | 8,174 | |||||||||||
Trading account assets | 2,300 | — | — | 2,300 | |||||||||||
Customer interest rate swap agreements | — | 496 | — | 496 | |||||||||||
Financial Liabilities: | |||||||||||||||
Interest rate swap agreements | — | 11,580 | — | 11,580 |
Readily Available Market Prices (Level 1) | Observable Market Data (Level 2) | Company Determined Fair Value (Level 3) | Total | ||||||||||||
June 30, 2013 | |||||||||||||||
Assets: | |||||||||||||||
Collateral-dependent impaired loans | $ | — | $ | — | $ | 7,998 | $ | 7,998 | |||||||
Other real estate owned | — | — | 2,155 | 2,155 | |||||||||||
Mortgage servicing rights | — | 1,316 | — | 1,316 | |||||||||||
December 31, 2012 | |||||||||||||||
Assets: | |||||||||||||||
Collateral-dependent impaired loans | $ | — | $ | — | $ | 9,183 | $ | 9,183 | |||||||
Other real estate owned | — | — | 1,313 | 1,313 | |||||||||||
Mortgage servicing rights | — | 879 | — | 879 |
Fair Value | Valuation Methodology | Unobservable input | Discount Range | ||||||||
June 30, 2013 | |||||||||||
Collateral-dependent impaired loans: (1) | |||||||||||
Partially charged-off | $ | 3,378 | Market approach appraisal of collateral | Management adjustment of appraisal | 10 – 30 | % | |||||
Specifically reserved | $ | 4,620 | Market approach appraisal of collateral | Management adjustment of appraisal | — | (2) | |||||
Other real estate owned | $ | 2,155 | Market approach appraisal of collateral | Management adjustment of appraisal | 10 – 30 | % | |||||
Estimated selling cost | 6 – 10 | % | |||||||||
December 31, 2012 | |||||||||||
Collateral-dependent impaired loans:(1) | |||||||||||
Partially charged-off | $ | 3,524 | Market approach appraisal of collateral | Management adjustment of appraisal | 10 – 30 | % | |||||
Specifically reserved | $ | 5,659 | Market approach appraisal of collateral | Management adjustment of appraisal | — | (2) | |||||
Other real estate owned | $ | 1,313 | Market approach appraisal of collateral | Management adjustment of appraisal | 10 – 30 | % | |||||
Estimated selling cost | 6 – 10 | % |
(1) | Does not include impaired loans that are measured by the present value of expected future cash flows discounted at the loan’s effective interest rate. |
(2) | The specific reserve for collateral-dependent impaired loans is determined by any deficit of 75% of collateral value over the recorded investment. |
Carrying Amount | Fair Value | Readily Available Market Prices (Level 1) | Observable Market Prices (Level 2) | Company Determined Market Prices (Level 3) | |||||||||||||||
Financial assets: | |||||||||||||||||||
Cash and due from banks | $ | 44,896 | $ | 44,896 | $ | 44,896 | $ | — | $ | — | |||||||||
Securities available-for-sale | 789,369 | 789,369 | — | 789,369 | — | ||||||||||||||
FHLB and Federal Reserve Bank stock | 19,724 | 19,724 | 19,724 | — | — | ||||||||||||||
Trading account assets | 2,281 | 2,281 | 2,281 | — | — | ||||||||||||||
Loans held for sale | 2,826 | 2,826 | — | 2,826 | — | ||||||||||||||
Residential real estate loans | 561,975 | 575,594 | — | — | 575,594 | ||||||||||||||
Commercial real estate loans | 518,640 | 508,194 | — | — | 508,194 | ||||||||||||||
Commercial loans | 183,059 | 180,642 | — | — | 180,642 | ||||||||||||||
Home equity loans | 297,717 | 296,968 | — | — | 296,968 | ||||||||||||||
Consumer loans | 17,847 | 18,104 | — | — | 18,104 | ||||||||||||||
Mortgage servicing rights | 774 | 1,316 | — | 1,316 | — | ||||||||||||||
Interest receivable | 6,506 | 6,506 | — | 6,506 | — | ||||||||||||||
Investment in trust preferred securities affiliates | 1,331 | 1,331 | — | — | 1,331 | ||||||||||||||
Customer interest rate swap agreements | 193 | 193 | — | 193 | — | ||||||||||||||
Financial liabilities: | |||||||||||||||||||
Deposits | 1,894,087 | 1,899,346 | 1,340,252 | 559,094 | — | ||||||||||||||
FHLB advances | 186,147 | 189,421 | — | 189,421 | — | ||||||||||||||
Commercial repurchase agreements | 30,165 | 32,615 | — | 32,615 | — | ||||||||||||||
Other borrowed funds | 188,153 | 188,153 | 188,153 | — | — | ||||||||||||||
Junior subordinated debentures | 43,870 | 43,845 | — | 43,845 | — | ||||||||||||||
Interest payable | 563 | 563 | 563 | — | — | ||||||||||||||
Interest rate swap agreements | 6,437 | 6,437 | — | 6,437 | — |
Carrying Amount | Fair Value | Readily Available Market Prices (Level 1) | Observable Market Prices (Level 2) | Company Determined Market Prices (Level 3) | |||||||||||||||
Financial assets: | |||||||||||||||||||
Cash and due from banks | $ | 58,290 | $ | 58,290 | $ | 58,290 | $ | — | $ | — | |||||||||
Securities available-for-sale | 781,050 | 781,050 | — | 781,050 | — | ||||||||||||||
FHLB and Federal Reserve Bank stock | 21,034 | 21,034 | 21,034 | — | — | ||||||||||||||
Trading account assets | 2,300 | 2,300 | 2,300 | — | — | ||||||||||||||
Residential real estate loans | 564,184 | 591,139 | — | — | 591,139 | ||||||||||||||
Commercial real estate loans | 501,037 | 492,602 | — | — | 492,602 | ||||||||||||||
Commercial loans | 183,680 | 179,519 | — | — | 179,519 | ||||||||||||||
Home equity loans | 275,498 | 277,194 | — | — | 277,194 | ||||||||||||||
Consumer loans | 16,423 | 16,866 | — | — | 16,866 | ||||||||||||||
Mortgage servicing rights | 542 | 879 | — | 879 | — | ||||||||||||||
Interest receivable | 6,215 | 6,215 | — | 6,215 | — | ||||||||||||||
Investment in trust preferred securities affiliates | 1,331 | 1,331 | — | — | 1,331 | ||||||||||||||
Customer interest rate swap agreements | 496 | 496 | — | 496 | — | ||||||||||||||
Financial liabilities: | |||||||||||||||||||
Deposits | 1,929,469 | 1,936,446 | 1,339,290 | 597,156 | — | ||||||||||||||
FHLB advances | 56,404 | 60,813 | — | 60,813 | — | ||||||||||||||
Commercial repurchase agreements | 66,187 | 69,067 | — | 69,067 | — | ||||||||||||||
Other borrowed funds | 193,753 | 193,753 | 193,753 | — | — | ||||||||||||||
Junior subordinated debentures | 43,819 | 43,819 | — | 43,819 | — | ||||||||||||||
Interest payable | 905 | 905 | 905 | — | — | ||||||||||||||
Interest rate swap agreements | 11,580 | 11,580 | — | 11,580 | — |
June 30, 2013 | December 31, 2012 | ||||||
Lending-Related Instruments: | |||||||
Loan origination commitments and unadvanced lines of credit: | |||||||
Home equity | $ | 306,168 | $ | 277,373 | |||
Commercial and commercial real estate | 13,795 | 20,016 | |||||
Residential | 12,102 | 9,497 | |||||
Letters of credit | 2,076 | 1,836 | |||||
Other commitments | 17,880 | 16,845 | |||||
Derivative Financial Instruments: | |||||||
Forward mortgage loan sale commitments | 7,301 | — | |||||
Derivative mortgage loan commitments | 4,501 | — | |||||
Customer loan swaps | 15,933 | 16,093 | |||||
Interest rate swaps | 43,000 | 43,000 |
Notional Amount | Fixed Cost | Maturity Date | ||||
$ | 10,000 | 5.09% | June 30, 2021 | |||
10,000 | 5.84% | June 30, 2029 | ||||
10,000 | 5.71% | June 30, 2030 | ||||
5,000 | 4.35% | March 30, 2031 | ||||
8,000 | 4.14% | July 7, 2031 |
• | continued weakness in the United States economy in general and the regional and local economies within the New England region and Maine, which could result in a deterioration of credit quality, a change in the allowance for loan losses or a reduced demand for the Company’s credit or fee-based products and services; |
• | adverse changes in the local real estate market could result in a deterioration of credit quality and an increase in the allowance for loan loss, as most of the Company’s loans are concentrated in Maine, and a substantial portion of these loans have real estate as collateral; |
• | changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; |
• | inflation, interest rate, market and monetary fluctuations; |
• | competitive pressures, including continued industry consolidation, the increased financial services provided by non-banks and banking reform; |
• | volatility in the securities markets that could adversely affect the value or credit quality of the Company’s assets, impairment of goodwill, the availability and terms of funding necessary to meet the Company’s liquidity needs and the Company’s ability to originate loans; |
• | changes in information technology that require increased capital spending; |
• | changes in consumer spending and savings habits; |
• | changes in laws and regulations, including new laws and regulations concerning taxes, banking, securities and insurance; and |
• | changes in accounting policies, practices and standards, as may be adopted by the regulatory agencies as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board (“FASB”), and other accounting standard setters. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(Dollars in Thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Non-interest expense, as presented | $ | 15,648 | $ | 13,979 | $ | 32,148 | $ | 26,898 | ||||||||
Less acquisition/divestiture costs | 71 | — | 232 | — | ||||||||||||
Less prepayment fees on borrowings | — | 728 | — | 728 | ||||||||||||
Adjusted non-interest expense | $ | 15,577 | $ | 13,251 | $ | 31,916 | $ | 26,170 | ||||||||
Net interest income, as presented | $ | 19,250 | $ | 18,366 | $ | 38,418 | $ | 36,737 | ||||||||
Effect of tax-exempt income | 205 | 253 | 415 | 510 | ||||||||||||
Non-interest income | 6,376 | 5,754 | 12,712 | 10,982 | ||||||||||||
Less net gains on sale of securities, net of OTTI | — | (751 | ) | (138 | ) | (872 | ) | |||||||||
Adjusted net interest income plus non-interest income | $ | 25,831 | $ | 23,622 | $ | 51,407 | $ | 47,357 | ||||||||
Non-GAAP efficiency ratio | 60.30 | % | 56.10 | % | 62.08 | % | 55.26 | % | ||||||||
GAAP efficiency ratio | 61.06 | % | 57.96 | % | 62.88 | % | 56.37 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(Dollars in Thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Net interest income, as presented | $ | 19,250 | $ | 18,366 | $ | 38,418 | $ | 36,737 | ||||||||
Effect of tax-exempt income | 205 | 253 | 415 | 510 | ||||||||||||
Net interest income, tax equivalent | $ | 19,455 | $ | 18,619 | $ | 38,833 | $ | 37,247 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(Dollars in Thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income, as presented | $ | 6,331 | $ | 6,412 | $ | 11,993 | $ | 12,995 | ||||||||
Average shareholders’ equity, as presented | 237,166 | 224,588 | 235,679 | 222,512 | ||||||||||||
Less average goodwill and other intangibles | 52,860 | 44,696 | 53,007 | 44,871 | ||||||||||||
Average tangible shareholders’ equity | $ | 184,306 | $ | 179,892 | $ | 182,672 | $ | 177,641 | ||||||||
Return on average tangible equity (annualized) | 13.78 | % | 14.33 | % | 13.24 | % | 14.71 | % | ||||||||
Return on average equity (annualized) | 10.71 | % | 11.48 | % | 10.26 | % | 11.74 | % |
• | Non-interest expense increased $5.3 million primarily due to incremental operating expenses related to the branch acquisition, including compensation costs, facilities expenses, data processing costs and other expenses associated with 35% more deposit accounts, 24% additional employees and 12 additional branches. |
• | Net interest income on a fully-taxable equivalent basis of $38.8 million for the first six months ended June 30, 2013, increased $1.6 million, or 4%, primarily due to the 31 basis point reduction in the average cost of funds, as a result of lower interest rates and the addition of $287.6 million in lower cost deposits acquired with the branch acquisition in 2012. |
• | The provision for credit losses decreased $471,000 to $1.4 million due to lower charge-offs and improved credit quality factors. |
• | Non-interest income increased $1.7 million, or 16%, primarily due to the growth in deposit-related service fees associated with the acquired deposit accounts. In addition, mortgage banking income increased $690,000, and net gain on sale of securities and other-than-temporary impairment of securities decreased $734,000 due to fewer sales of securities. |
• | Net interest income on a fully-taxable equivalent basis of $19.5 million increased $836,000, or 4%, compared to the same period of 2012 primarily due to the reduction in average cost of funds as a result of lower interest rates and the addition of $287.6 million in lower cost deposits acquired with the branch acquisition in 2012. |
• | The provision for credit losses decreased $140,000 to $695,000 due to improved asset quality measures. |
• | Non-interest income increased $622,000, or 11%, compared to the same period of 2012 primarily due to the growth in deposit-related service fees associated with the acquired deposit accounts and a mortgage banking income increase of $452,000, partially offset by a reduction in net security gains of $751,000. |
• | Non-interest expense increased $1.7 million, or 12%, compared to the same period of 2012 primarily due to incremental operating expenses of $2.3 million related to the branch acquisition, partially offset by a decrease in prepayment fees on borrowings of $728,000. |
• | Total loans at June 30, 2013 were $1.6 billion, an increase of $38.7 million compared to December 31, 2012. The loan portfolio is up 5% on an annualized basis primarily due to growth in the home equity and commercial real estate loan portfolios of $23.5 million and $16.8 million, respectively. |
• | Available-for-sale securities increased $8.3 million at June 30, 2013 compared to December 31, 2012. |
• | Total deposits at June 30, 2013 decreased $35.4 million to $1.9 billion since year end as retail certificates of deposit decreased $25.3 million and core deposits (checking, savings, and money market) decreased $16.4 million due to our typical seasonal outflow of deposits during the first quarter of each year. |
• | Shareholders' equity declined $4.2 million, or 2%, primarily due to other comprehensive loss of $12.3 million and dividends of $4.1 million, partially offset by net income of $12.0 million. |
Average Balance, Interest and Yield/Rate Analysis | ||||||||||||||||||||||
Six Months Ended | Six Months Ended | |||||||||||||||||||||
June 30, 2013 | June 30, 2012 | |||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest | Yield/Rate | Average Balance | Interest | Yield/Rate | ||||||||||||||||
Assets | ||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||
Securities - taxable | $ | 772,469 | $ | 8,445 | 2.19 | % | $ | 588,892 | $ | 8,329 | 2.83 | % | ||||||||||
Securities - nontaxable (1) | 31,238 | 919 | 5.88 | % | 38,863 | 1,109 | 5.71 | % | ||||||||||||||
Trading account assets | 2,241 | 12 | 1.05 | % | 2,189 | 10 | 0.88 | % | ||||||||||||||
Loans: (1) (2) | ||||||||||||||||||||||
Residential real estate | 574,031 | 13,171 | 4.59 | % | 576,442 | 14,010 | 4.86 | % | ||||||||||||||
Commercial real estate | 507,478 | 12,301 | 4.82 | % | 483,639 | 12,123 | 4.96 | % | ||||||||||||||
Commercial | 177,718 | 3,935 | 4.40 | % | 168,903 | 4,028 | 4.72 | % | ||||||||||||||
Municipal | 12,267 | 267 | 4.39 | % | 13,540 | 347 | 5.16 | % | ||||||||||||||
Consumer | 308,700 | 6,272 | 4.10 | % | 284,076 | 6,316 | 4.47 | % | ||||||||||||||
Total loans | 1,580,194 | 35,946 | 4.55 | % | 1,526,600 | 36,824 | 4.81 | % | ||||||||||||||
Total interest-earning assets | 2,386,142 | 45,322 | 3.80 | % | 2,156,544 | 46,272 | 4.28 | % | ||||||||||||||
Cash and due from banks | 44,249 | 36,095 | ||||||||||||||||||||
Other assets | 166,517 | 154,375 | ||||||||||||||||||||
Less allowance for loan losses | (23,331 | ) | (23,189 | ) | ||||||||||||||||||
Total assets | $ | 2,573,577 | $ | 2,323,825 | ||||||||||||||||||
Liabilities & Shareholders' Equity | ||||||||||||||||||||||
Retail deposits: | ||||||||||||||||||||||
Non-interest bearing demand deposits | $ | 227,721 | $ | — | — | $ | 259,360 | $ | — | — | ||||||||||||
Interest checking accounts | 472,634 | 157 | 0.07 | % | 278,144 | 155 | 0.11 | % | ||||||||||||||
Savings accounts | 233,219 | 65 | 0.06 | % | 184,900 | 181 | 0.20 | % | ||||||||||||||
Money market accounts | 450,929 | 710 | 0.32 | % | 353,088 | 1,056 | 0.60 | % | ||||||||||||||
Certificates of deposit | 407,407 | 2,000 | 0.99 | % | 384,630 | 2,598 | 1.36 | % | ||||||||||||||
Total retail deposits | 1,791,910 | 2,932 | 0.33 | % | 1,460,122 | 3,990 | 0.53 | % | ||||||||||||||
Borrowings: | ||||||||||||||||||||||
Brokered deposits | 124,607 | 715 | 1.16 | % | 130,248 | 938 | 1.45 | % | ||||||||||||||
Junior subordinated debentures | 43,845 | 1,257 | 5.78 | % | 43,743 | 1,270 | 5.84 | % | ||||||||||||||
Other borrowings | 343,328 | 1,585 | 0.93 | % | 433,562 | 2,827 | 1.31 | % | ||||||||||||||
Total borrowings | 511,780 | 3,557 | 1.40 | % | 607,553 | 5,035 | 1.67 | % | ||||||||||||||
Total funding liabilities | 2,303,690 | 6,489 | 0.57 | % | 2,067,675 | 9,025 | 0.88 | % | ||||||||||||||
Other liabilities | 34,208 | 33,638 | ||||||||||||||||||||
Shareholders' equity | 235,679 | 222,512 | ||||||||||||||||||||
Total liabilities & shareholders' equity | $ | 2,573,577 | $ | 2,323,825 | ||||||||||||||||||
Net interest income (fully-taxable equivalent) | 38,833 | 37,247 | ||||||||||||||||||||
Less: fully-taxable equivalent adjustment | (415 | ) | (510 | ) | ||||||||||||||||||
Net interest income | $ | 38,418 | $ | 36,737 | ||||||||||||||||||
Net interest rate spread (fully-taxable equivalent) | 3.23 | % | 3.40 | % | ||||||||||||||||||
Net interest margin (fully-taxable equivalent) | 3.25 | % | 3.44 | % | ||||||||||||||||||
(1) Reported on tax-equivalent basis calculated using a tax rate of 35%. | ||||||||||||||||||||||
(2) Non-accrual loans and loans held for sale are included in total average loans. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(Dollars in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Service charges on deposit accounts | $ | 1,755 | $ | 1,315 | $ | 3,439 | $ | 2,471 | ||||||||
Other service charges and fees | 1,513 | 956 | 2,942 | 1,801 | ||||||||||||
Income from fiduciary services | 1,275 | 1,289 | 2,418 | 2,728 | ||||||||||||
Mortgage banking income, net | 584 | 132 | 1,158 | 468 | ||||||||||||
Brokerage and insurance commissions | 409 | 410 | 821 | 749 | ||||||||||||
Bank-owned life insurance | 314 | 342 | 652 | 681 | ||||||||||||
Net gain on sale of securities and other-than-temporary impairment of securities | — | 751 | 138 | 872 | ||||||||||||
Other income | 526 | 559 | 1,144 | 1,212 | ||||||||||||
Total non-interest income | $ | 6,376 | $ | 5,754 | $ | 12,712 | $ | 10,982 |
• | Increase in deposit-related service fees and other service charges and fees of $2.1 million associated with the acquired deposit accounts; |
• | Increase in mortgage banking income of $690,000 primarily due to cash gains and mortgage servicing valuation associated with increased loan sales; and |
• | Decrease in net gain on sale of securities and other-than-temporary impairment of $734,000 due to fewer sales. |
• | Increase in deposit-related service fees and other service charges and fees of $997,000 associated with the acquired deposit accounts; |
• | Increase in mortgage banking income of $452,000 primarily due to cash gains and mortgage servicing valuation associated with increased loan sales; and |
• | Decrease in net gain on sale of securities and other-than-temporary impairment of $751,000 due to fewer security sales. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(Dollars in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Salaries and employee benefits | $ | 7,961 | $ | 6,972 | $ | 16,322 | $ | 13,880 | ||||||||
Furniture, equipment and data processing | 1,931 | 1,295 | 3,535 | 2,518 | ||||||||||||
Net occupancy | 1,407 | 1,020 | 2,959 | 2,131 | ||||||||||||
Other real estate owned and collection costs (recoveries), net | (22 | ) | 497 | 866 | 1,123 | |||||||||||
Consulting and professional fees | 585 | 608 | 1,132 | 1,098 | ||||||||||||
Regulatory assessments | 500 | 432 | 999 | 867 | ||||||||||||
Amortization of intangible assets | 287 | 145 | 574 | 289 | ||||||||||||
Branch acquisition/divestiture costs | 71 | — | 232 | — | ||||||||||||
Other expenses | 2,928 | 3,010 | 5,529 | 4,992 | ||||||||||||
Total Non-Interest Expense | $ | 15,648 | $ | 13,979 | $ | 32,148 | $ | 26,898 |
• | Increase in salaries and employee benefits of $2.4 million, or 18%, due to an increase in the average full-time equivalent number of employees of 95, or 23%, primarily due to new positions associated with the branch acquisition; |
• | Increase in furniture, equipment and data processing of $1.0 million, or 40%, primarily related to the core operating system conversion for Acadia Trust, N.A. of $198,000, costs associated with upgrading the ATM network, and the incremental cost of supporting 35% more deposit accounts and additional branches; |
• | Increase in net occupancy of $828,000, or 39%, primarily due to the increased costs associated with supporting additional branch facilities, closing one leased facility, and a colder winter resulting in higher heating and snow removal costs; and |
• | Increase in other expenses of $537,000 due to increased costs associated with the acquired branches, partially offset by a decrease in prepayment fees on borrowings of $728,000. |
• | Increase in salaries and employee benefits of $989,000, or 14%, due to an increase in the average full-time equivalent number of employees of 84, or 21%, primarily due to new positions associated with the branch acquisition; |
• | Increase in furniture, equipment and data processing of $636,000, or 49%, primarily related to the core operating system conversion for Acadia Trust, N.A. of $182,000, costs associated with upgrading the ATM network, and the incremental cost of supporting 35% more deposit accounts and additional branches; and |
• | Decrease in other real estate owned and collection costs of $519,000 due to a recovery on servicing related claims combined with lower levels of foreclosures and OREO expenses. |
June 30, | December 31, | |||||||
(Dollars in Thousands) | 2013 | 2012 | ||||||
Non-accrual loans | ||||||||
Residential real estate | $ | 8,624 | $ | 10,584 | ||||
Commercial real estate | 6,634 | 6,719 | ||||||
Commercial | 3,233 | 3,409 | ||||||
Consumer and home equity loans | 1,945 | 1,771 | ||||||
Total non-accrual loans | 20,436 | 22,483 | ||||||
Accruing loans past due 90 days | — | 611 | ||||||
Accruing renegotiated loans not included above | 5,701 | 4,674 | ||||||
Total non-performing loans | 26,137 | 27,768 | ||||||
Other real estate owned | 2,155 | 1,313 | ||||||
Total non-performing assets | $ | 28,292 | $ | 29,081 | ||||
Non-performing loans to total loans | 1.63 | % | 1.78 | % | ||||
Allowance for credit losses to non-performing loans | 89.34 | % | 83.15 | % | ||||
Non-performing assets to total assets | 1.09 | % | 1.13 | % | ||||
Allowance for credit losses to non-performing assets | 82.54 | % | 79.40 | % |
June 30, | December 31, | |||||||
(Dollars in Thousands) | 2013 | 2012 | ||||||
Loans 30-89 days past due: | ||||||||
Residential real estate | $ | 1,827 | $ | 1,658 | ||||
Commercial real estate | 1,591 | 2,618 | ||||||
Commercial | 202 | 1,043 | ||||||
Consumer and home equity loans | 716 | 2,721 | ||||||
Total loans 30-89 days past due | $ | 4,336 | $ | 8,040 | ||||
Loans 30-89 days past due to total loans | 0.27 | % | 0.51 | % |
Six Months Ended June 30, | ||||||||
(Dollars in Thousands) | 2013 | 2012 | ||||||
Allowance at the beginning of the period | $ | 23,044 | $ | 23,011 | ||||
Provision for loan losses | 1,384 | 1,817 | ||||||
Charge-offs: | ||||||||
Residential real estate loans | 347 | 446 | ||||||
Commercial real estate | 171 | 209 | ||||||
Commercial loans | 444 | 416 | ||||||
Consumer and home equity loans | 470 | 879 | ||||||
Total loan charge-offs | 1,432 | 1,950 | ||||||
Recoveries: | ||||||||
Residential real estate loans | 5 | 68 | ||||||
Commercial real estate loans | 92 | 166 | ||||||
Commercial loans | 198 | 120 | ||||||
Consumer and home equity loans | 30 | 30 | ||||||
Total loan recoveries | 325 | 384 | ||||||
Net charge-offs | (1,107 | ) | (1,566 | ) | ||||
Allowance at the end of the period | $ | 23,321 | $ | 23,262 | ||||
Components of allowance for credit losses: | ||||||||
Allowance for loan losses | $ | 23,321 | $ | 23,262 | ||||
Liability for unfunded credit commitments | 30 | 43 | ||||||
Balance of allowance for credit losses at end of the period | $ | 23,351 | $ | 23,305 | ||||
Average loans outstanding | $ | 1,580,194 | $ | 1,526,600 | ||||
Net charge-offs (annualized) to average loans outstanding | 0.14 | % | 0.21 | % | ||||
Provision for credit losses (annualized) to average loans outstanding | 0.17 | % | 0.24 | % | ||||
Allowance for credit losses to total loans | 1.45 | % | 1.52 | % | ||||
Allowance for credit losses to net charge-offs (annualized) | 1,054.44 | % | 744.29 | % | ||||
Allowance for credit losses to non-performing loans | 89.34 | % | 83.09 | % | ||||
Allowance for credit losses to non-performing assets | 82.54 | % | 78.35 | % |
June 30, 2013 | December 31, 2012 | ||||||
Return on average equity | 10.26 | % | 10.31 | % | |||
Average equity to average assets | 9.16 | % | 9.48 | % | |||
Dividend payout ratio | 33.19 | % | 32.73 | % | |||
Dividends declared per share | $ | 0.54 | $ | 1.00 | |||
Book value per share | $ | 30.05 | $ | 30.67 |
June 30, 2013 | December 31, 2012 | June 30, 2012 | ||||||
Tier 1 capital to risk-weighted assets | 14.57 | % | 14.31 | % | 14.97 | % | ||
Total capital to risk-weighted assets | 15.82 | % | 15.56 | % | 16.22 | % | ||
Tier 1 leverage capital ratio | 9.05 | % | 8.94 | % | 9.64 | % |
Total Amount | Commitment Expires in: | |||||||||||||||||||
(Dollars in Thousands) | Committed | <1 Year | 1 – 3 Years | 4 – 5 Years | >5 Years | |||||||||||||||
Letters of Credit | $ | 2,076 | $ | 2,076 | $ | — | $ | — | $ | — | ||||||||||
Commercial Commitment Letters | 13,795 | 13,795 | — | — | — | |||||||||||||||
Residential Loan Origination | 12,102 | 12,102 | — | — | — | |||||||||||||||
Home Equity Line of Credit Commitments | 306,168 | 99,746 | 5,690 | 6,629 | 194,103 | |||||||||||||||
Other Commitments to Extend Credit | 17,880 | 17,880 | — | — | — | |||||||||||||||
Total | $ | 352,021 | $ | 145,599 | $ | 5,690 | $ | 6,629 | $ | 194,103 |
Total Amount | Payments Due per Period | ||||||||||||||||||||
(Dollars in Thousands) | of Obligations | <1 Year | 1 – 3 Years | 4 – 5 Years | >5 Years | ||||||||||||||||
Operating Leases | $ | 5,521 | $ | 1,137 | $ | 1,763 | $ | 1,287 | $ | 1,334 | |||||||||||
Capital Leases | 1,072 | 58 | 124 | 134 | 756 | (1) | |||||||||||||||
FHLBB Borrowings – Overnight | 59,600 | 59,600 | — | — | — | ||||||||||||||||
FHLBB Borrowings – Advances | 186,147 | 130,000 | 21,147 | 35,000 | — | ||||||||||||||||
Commercial Repurchase Agreements | 30,165 | — | — | 30,165 | — | ||||||||||||||||
Other Borrowed Funds | 127,436 | 127,436 | — | — | — | ||||||||||||||||
Junior Subordinated Debentures | 43,870 | — | — | — | 43,870 | ||||||||||||||||
Note Payable | 44 | 35 | 9 | — | — | ||||||||||||||||
Other Contractual Obligations | 1,118 | 1,118 | — | — | — | ||||||||||||||||
Total | $ | 454,973 | $ | 319,384 | $ | 23,043 | $ | 66,586 | $ | 45,960 |
(1) | Excludes contingent rentals, which are based on the Consumer Price Index and reset every five years. Total contingent rentals for year one through year five are $21,000. |
Notional Amount | Fixed Cost | Maturity Date | ||||
$ | 10,000 | 5.09% | June 30, 2021 | |||
10,000 | 5.84% | June 30, 2029 | ||||
10,000 | 5.71% | June 30, 2030 | ||||
5,000 | 4.35% | March 30, 2031 | ||||
8,000 | 4.14% | July 7, 2031 |
Estimated Changes in NII | ||||||
Rate Change from Year 1 - Base | June 30, 2013 | June 30, 2012 | ||||
Year 1 | ||||||
+400 bp | (3.65 | )% | (2.87 | )% | ||
+200 bp | (3.67 | )% | (2.87 | )% | ||
-100 bp | (0.59 | )% | (0.16 | )% | ||
Year 2 | ||||||
+400 bp | (7.40 | )% | (6.99 | )% | ||
+200 bp | (4.04 | )% | (5.34 | )% | ||
-100 bp | (5.91 | )% | (8.81 | )% |
(a) Exhibits | |
(23.1) Consent of Berry Dunn McNeil & Parker, LLC relating to the consolidated financial statements of Camden National Corporation* | |
(31.1) Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934* | |
(31.2) Certification of Chief Financial Officer, Principal Financial & Accounting Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934* | |
(32.1) Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
(32.2) Certification of Chief Financial Officer, Principal Financial & Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
(101) – XBRL (Extensible Business Reporting Language)*** | |
The following materials from Camden National Corporation’s Quarterly Report on Form 10-Q for the period ended June 30, 2013, formatted in XBRL: (i) Consolidated Statements of Condition - June 30, 2013 and December 31, 2012; (ii) Consolidated Statements of Income - Three and Six Months Ended June 30, 2013 and 2012; (iii) Consolidated Statements of Comprehensive Income - Three and Six Months Ended June 30, 2013 and 2012; (iv) Consolidated Statements of Changes in Shareholders’ Equity - Six Months Ended June 30, 2013 and 2012; (v) Consolidated Statements of Cash Flows - Six Months Ended June 30, 2013 and 2012; and (vi) Notes to Consolidated Financial Statements. | |
* | Filed herewith |
** | Furnished herewith |
*** | Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934, as amended. |
CAMDEN NATIONAL CORPORATION | |||
(Registrant) | |||
/s/ Gregory A. Dufour | August 2, 2013 | ||
Gregory A. Dufour | Date | ||
President and Chief Executive Officer (Principal Executive Office) | |||
/s/ Deborah A. Jordan | August 2, 2013 | ||
Deborah A. Jordan | Date | ||
Chief Financial Officer | |||
(Principal Financial & Accounting Officer) |
(23.1) | Consent of Berry Dunn McNeil & Parker, LLC relating to the financial statements of Camden National Corporation* | |
(31.1) | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934* | |
(31.2) | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
(32.2) | Certification Chief Financial Officer, Principal Financial & Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
(101) | XBRL (Extensible Business Reporting Language)*** |
* | Filed herewith |
** | Furnished herewith |
*** | Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934, as amended. |
/s/ Berry Dunn McNeil & Parker, LLC |
Berry Dunn McNeil & Parker, LLC |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Gregory A. Dufour | |
Gregory A. Dufour | |
President and Chief Executive Officer |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control+ over financial reporting. |
/s/ Deborah A. Jordan | |
Deborah A. Jordan | |
Chief Financial Officer and Principal | |
Financial & Accounting Officer |
/s/ Gregory A. Dufour | August 2, 2013 | |
Gregory A. Dufour | Date | |
President and Chief Executive Officer |
/s/ Deborah A. Jordan | August 2, 2013 | |
Deborah A. Jordan | Date | |
Chief Financial Officer and Principal | ||
Financial & Accounting Officer |
FAIR VALUE MEASUREMENT
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Jun. 30, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENT | FAIR VALUE MEASUREMENT AND DISCLOSURE Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined using quoted market prices. However, in many instances, quoted market prices are not available. In such instances, fair values are determined using various valuation techniques. Various assumptions and observable inputs must be relied upon in applying these techniques. GAAP establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. GAAP permits an entity to choose to measure eligible financial instruments and other items at fair value. The Company has elected the fair value option for its loans held for sale. Electing the fair value option for loans held for sale enables the Company’s financial position to more clearly align with the economic value of the actively traded asset. The fair value hierarchy for valuation of an asset or liability is as follows: Level 1: Valuation is based upon unadjusted quoted prices in active markets for identical assets and liabilities that the entity has the ability to access as of the measurement date. Level 2: Valuation is determined from quoted prices for similar assets or liabilities in active markets, from quoted prices for identical or similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market. Level 3: Valuation is derived from model-based and other techniques in which at least one significant input is unobservable and which may be based on the Company’s own estimates about the assumptions that market participants would use to value the asset or liability. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon model-based techniques incorporating various assumptions including interest rates, prepayment speeds and credit losses. Assets and liabilities valued using model-based techniques are classified as either Level 2 or Level 3, depending on the lowest level classification of an input that is considered significant to the overall valuation. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. Financial Instruments Recorded at Fair Value on a Recurring Basis Securities Available-for-sale: The fair value of debt securities available-for-sale is reported utilizing prices provided by an independent pricing service based on recent trading activity and other observable information including, but not limited to, dealer quotes, market spreads, cash flows, market interest rate curves, market consensus prepayment speeds, credit information, and the bond’s terms and conditions. The fair value of equity securities available-for-sale was calculated using a discounted cash flow analysis using observable information including, but not limited to, cash flows, risk-adjusted discount rates and market spreads. The fair values of debt and equity securities are classified as Level 2. Trading Account Assets: Trading account assets are invested in mutual funds and classified as Level 1 based upon quoted prices. Loans Held for Sale: The fair value of loans held for sale is determined using quoted secondary market prices or executed sales agreements and classified as Level 2. Derivatives: The fair value of interest rate swaps is determined using inputs that are observable in the market place obtained from third parties including yield curves, publicly available volatilities, and floating indexes and, accordingly, are classified as Level 2 inputs. The credit value adjustments associated with derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. As of June 30, 2013 and December 31, 2012, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives due to collateral postings. The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2013 and December 31, 2012, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended June 30, 2013. The Company’s policy for determining transfers between levels occurs at the end of the reporting period when circumstances in the underlying valuation criteria change and result in transfer between levels. Financial Instruments Recorded at Fair Value on a Nonrecurring Basis The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis in accordance with GAAP. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. Collateral-Dependent Impaired Loans: Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, the Company measures impairment in accordance with GAAP. Impaired loans are measured using one of three methods: the present value of expected future cash flows discounted at the loan’s effective interest rate; the loan’s observable market price; or the fair value of the collateral if the loan is collateral dependent. If the measure is less than an impaired loan’s recorded investment, an impairment loss is recognized as part of the ALL. Accordingly, certain impaired loans may be subject to measurement at fair value on a non-recurring basis. Management has estimated the fair values of these assets using Level 2 inputs, such as the fair value of collateral based on independent third-party market approach appraisals for collateral-dependent loans, and level 3 inputs where circumstances warrant an adjustment to the appraised value based on the age of the appraisal and/or comparable sales, condition of the collateral, and market conditions. Mortgage Servicing Rights: The Company accounts for mortgage servicing assets at cost, subject to impairment testing. When the carrying value exceeds fair value, a valuation allowance is established to reduce the carrying cost to fair value. Fair value is based on a valuation model that calculates the present value of estimated net servicing income. The Company obtains a third-party valuation based upon loan level data including note rate, type and term of the underlying loans. The model utilizes a variety of observable inputs for its assumptions, the most significant of which are loan prepayment assumptions and the discount rate used to discount future cash flows. Other assumptions include delinquency rates, servicing cost inflation and annual unit loan cost. Mortgage servicing rights are classified within Level 2 of the fair value hierarchy. Non-Financial Assets and Non-Financial Liabilities Recorded at Fair Value The Company has no non-financial assets or non-financial liabilities measured at fair value on a recurring basis. Non-financial assets measured at fair value on a non-recurring basis consist of other real estate owned (“OREO”). OREO properties acquired through foreclosure or deed in lieu of foreclosure are recorded at the fair value of the real estate, less costs to sell. Any write-down of the recorded investment in the related loan is charged to the allowance for loan losses upon transfer to OREO. Upon acquisition of a property, a current appraisal or a broker’s opinion is used to substantiate fair value for the property. After foreclosure, management periodically obtains updated valuations of the OREO assets and, if additional impairments are deemed necessary, the subsequent write-downs for declines in value are recorded through a valuation allowance and a provision for losses charged to other non-interest expense. Certain assets require assumptions, such as expected future cash flows, that are not observable in an active market in determination of fair value and are classified as Level 3. Assets measured at fair value on a non-recurring basis as of June 30, 2013 and December 31, 2012 are included below:
The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at June 30, 2013:
GAAP requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The following methods and assumptions were used by the Company in estimating the fair values of its other financial instruments. Cash and Due from Banks: The carrying amounts reported in the consolidated statement of condition approximate fair value. FHLB and Federal Reserve Bank Stock and Investments in Trust Preferred Securities Affiliates: The carrying amounts reported in the consolidated statements of condition approximate fair value. Loans: For variable rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. The fair value of other loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Interest Receivable and Payable: The carrying amounts reported in the consolidated statements of condition approximate fair value. Deposits: The fair value of deposits with no stated maturity is equal to the carrying amount. The fair value of certificates of deposit is estimated using a discounted cash flow calculation that applies interest rates and remaining maturities for currently offered certificates of deposit. Borrowings: The carrying amounts of short-term borrowings from the FHLB, securities sold under repurchase agreements, notes payable and other short-term borrowings approximate fair value. The fair values of long-term borrowings and commercial repurchase agreements are based on the discounted cash flows using current rates for advances of similar remaining maturities. Junior Subordinated Debentures: The carrying amounts reported in the consolidated statements of condition approximate fair value. The following table presents the carrying amounts and estimated fair value for financial instrument assets and liabilities measured at June 30, 2013:
The following table presents the carrying amounts and estimated fair value for financial instrument assets and liabilities measured at December 31, 2012:
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COMMITMENTS AND CONTINGENCIES (Schedule of Swapped Variable Cost for Fixed Cost and Terms of Interest Rate Swap Agreements) (Details) (Interest rate swaps, USD $)
In Thousands, unless otherwise specified |
6 Months Ended | ||||||
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Jun. 30, 2013
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Dec. 31, 2012
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Jun. 30, 2013
Contract, One
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Jun. 30, 2013
Contract, Two
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Jun. 30, 2013
Contract, Three
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Jun. 30, 2013
Contract, Four
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Jun. 30, 2013
Contract, Five
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Derivative [Line Items] | |||||||
Notional Amount | $ 43,000 | $ 43,000 | $ 10,000 | $ 10,000 | $ 10,000 | $ 5,000 | $ 8,000 |
Fixed Cost | 5.09% | 5.84% | 5.71% | 4.35% | 4.14% | ||
Maturity Date | Jun. 30, 2021 | Jun. 30, 2029 | Jun. 30, 2030 | Mar. 30, 2031 | Jul. 07, 2031 |
BASIS OF PRESENTATION
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6 Months Ended |
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Jun. 30, 2013
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete presentation of financial statements. In the opinion of management, the consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated statements of condition of Camden National Corporation (the “Company”) as of June 30, 2013 and December 31, 2012, the consolidated statements of income for the three and six months ended June 30, 2013 and 2012, the consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2013 and 2012, the consolidated statements of changes in shareholders' equity for the six months ended June 30, 2013 and 2012, and the consolidated statements of cash flows for the six months ended ended June 30, 2013 and 2012. All significant intercompany transactions and balances are eliminated in consolidation. Certain items from the prior year were reclassified to conform to the current year presentation. The income reported for the three and six months period ended June 30, 2013 is not necessarily indicative of the results that may be expected for the full year. The information in this report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Annual Report for the year ended December 31, 2012, Form 10-K. |
GOODWILL, CORE DEPOSIT AND TRUST RELATIONSHIP INTANGIBLES (Tables)
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Jun. 30, 2013
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Goodwill | The changes in goodwill, core deposit intangible and trust relationship intangible for the six months ended June 30, 2013 are shown in the table below:
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Changes in Core Deposit Intangible and Trust Relationship Intangible |
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Expected Amortization Schedule for Intangible Assets | The following table reflects the expected amortization schedule for intangible assets at June 30, 2013:
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COMMITMENTS AND CONTINGENCIES
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Jun. 30, 2013
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Legal Contingencies In the normal course of business, the Company and its subsidiaries are subject to pending and threatened legal actions. Although the Company is not able to predict the outcome of such actions, after reviewing pending and threatened actions with counsel, management believes that based on the information currently available the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial position as a whole. Reserves are established for legal claims only when losses associated with the claims are judged to be probable and the loss can be reasonably estimated. In many lawsuits and arbitrations, it is not possible to determine whether a liability has been incurred or to estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case a reserve will not be recognized until that time. As of June 30, 2013, the Company did not have any loss contingencies that were both probable and estimable and, therefore, no accrued liability has been recognized. Financial Instruments In the normal course of business, the Company is a party to both on-balance sheet and off-balance sheet financial instruments involving, to varying degrees, elements of credit risk and interest rate risk in addition to the amounts recognized in the consolidated statements of condition. A summary of the contractual and notional amounts of the Company’s financial instruments follows:
Lending-Related Instruments The contractual amounts of the Company’s lending-related financial instruments do not necessarily represent future cash requirements since certain of these instruments may expire without being funded and others may not be fully drawn upon. These instruments are subject to the Company’s credit approval process, including an evaluation of the customer’s creditworthiness and related collateral requirements. Commitments generally have fixed expiration dates or other termination clauses. Derivative Financial Instruments The Company uses derivative financial instruments for risk management purposes (primarily interest rate risk) and not for trading or speculative purposes. The Company controls the credit risk of these instruments through collateral, credit approvals and monitoring procedures. The Company’s derivative contracts contain provisions that require the Company to post cash collateral with the counterparties for contracts that are in a net liability position based on their fair values and the Company’s credit rating. The Company had a notional amount of $43.0 million in interest rate swap agreements on its junior subordinated debentures and $6.7 million in cash held as collateral. The Company swapped the variable cost for a fixed cost and the terms of the interest rate swap agreements are as follows:
The fair value of the swap agreements on the junior subordinated debentures at June 30, 2013 was a liability of $6.2 million and, as this instrument qualifies as a highly effective cash flow hedge, the $3.1 million increase in fair value during the first six months of 2013, net of tax, was recorded in other comprehensive income and other liabilities. Net payments under the swap transactions were $829,000 in the first six months of 2013, and have been classified as cash flows from operating activities in the statement of cash flows. Customer Derivatives The Company has a notional amount of $8.0 million in an interest rate swap agreements with commercial customers and interest rate swap agreements of equal notional amounts with a dealer bank related to the Company’s commercial loan level derivative program. As the swap agreements have substantially equivalent and offsetting terms, they do not materially change the Company’s interest rate risk. Forward Commitments to Sell Residential Mortgage Loans The Company enters into forward commitments to sell residential mortgages in order to reduce the market risk associated with originating loans for sale in the secondary market. At June 30, 2013 the Company had $7.3 million of forward commitments to sell residential mortgages with positive fair value of $66,000. At December 31, 2012, the Company had no outstanding commitments to sell mortgages. As part of originating residential mortgage and commercial loans, the Company may enter into rate lock agreements with customers, and may issue commitment letters to customers, which are considered interest rate lock or forward commitments. At June 30, 2013 the Company had $4.5 million of mortgage loans with rate lock commitments with a positive fair value of $40,000 in a pipeline. |
FAIR VALUE MEASUREMENT (Summary of Assets Measured at Fair Value on Non Recurring Basis) (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
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Dec. 31, 2012
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Observable Market Data (Level 2)
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Assets: | ||
Mortgage servicing rights | $ 1,316 | $ 879 |
Fair Value, Measurements, Nonrecurring
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Assets: | ||
Collateral-dependent impaired loans | 7,998 | 9,183 |
Other real estate owned | 2,155 | 1,313 |
Mortgage servicing rights | 1,316 | 879 |
Fair Value, Measurements, Nonrecurring | Observable Market Data (Level 2)
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Assets: | ||
Mortgage servicing rights | 1,316 | 879 |
Fair Value, Measurements, Nonrecurring | Company Determined Fair Value (Level 3)
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Assets: | ||
Collateral-dependent impaired loans | 7,998 | 9,183 |
Other real estate owned | $ 2,155 | $ 1,313 |
COMMITMENTS AND CONTINGENCIES (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Contractual and Notional Amounts of Financial Instruments | A summary of the contractual and notional amounts of the Company’s financial instruments follows:
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Summary of Derivative Financial Instruments | The Company swapped the variable cost for a fixed cost and the terms of the interest rate swap agreements are as follows:
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FAIR VALUE MEASUREMENT (Tables)
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Jun. 30, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2013 and December 31, 2012, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
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Summary of Assets Measured at Fair Value on Non Recurring Basis | Assets measured at fair value on a non-recurring basis as of June 30, 2013 and December 31, 2012 are included below:
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Valuation Methodology and Unobservable Inputs for Level Three Assets Measured at Fair Value on Non Recurring Basis | The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at June 30, 2013:
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Carrying Amounts and Estimated Fair Value for Financial Instrument Assets and Liabilities | The following table presents the carrying amounts and estimated fair value for financial instrument assets and liabilities measured at June 30, 2013:
The following table presents the carrying amounts and estimated fair value for financial instrument assets and liabilities measured at December 31, 2012:
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