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Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2012
Allowance for Loan Losses [Abstract]  
Allowance for Loan Losses
(4) Allowance for Loan Losses

Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan losses, the Corporation has segmented certain loans in the portfolio by product type. Loans are segmented into the following pools: Commercial and Agricultural loans, Commercial Real Estate loans, Real Estate Mortgage loans, Real Estate Construction loans and Consumer loans. Historical loss percentages for each risk category are calculated and used as the basis for calculating loan loss allowance allocations. These historical loss percentages are calculated over a three-year period for all portfolio segments. Certain economic factors are also considered for trends which management uses to establish the directionality of changes to the unallocated portion of the reserve. The following economic factors are analyzed:

 

  •  

Changes in lending policies and procedures

 

  •  

Changes in experience and depth of lending and management staff

 

  •  

Changes in quality of Bank’s credit review system

 

  •  

Changes in nature and volume of the loan portfolio

 

  •  

Changes in past due, classified and nonaccrual loans and TDRs

 

  •  

Changes in economic and business conditions

 

  •  

Changes in competition or legal and regulatory requirements

 

  •  

Changes in concentrations within the loan portfolio

 

  •  

Changes in the underlying collateral for collateral dependent loans

 

The total allowance reflects management’s estimate of loan losses inherent in the loan portfolio at the balance sheet date. The Corporation considers the allowance for loan losses of $22,024 adequate to cover loan losses inherent in the loan portfolio, at March 31, 2012. The following tables present by portfolio segment, the changes in the allowance for loan losses and the loan balances outstanding for the three month period ended March 31, 2012 and 2011. The allowance for Real Estate Construction loans was reduced not only by charge-offs, but also due to a decrease in both the loan balances outstanding and the historical charge-offs for this type. The net result of these changes was a reduction in the allowance for this loan type and is represented as a decrease in the provision. The allowance for consumer loans was reduced not only by charge-offs, but also due to a decrease in both the loan balances outstanding and the historical charge-offs for this type. The allowance related to the unallocated segment was also reduced.

 

                                                         
    Commercial
& Agriculture		     Commercial
Real Estate		     Residential
Real Estate		     Real Estate
Construction		     Consumer     Unallocated     Total  

For the three months ending March 31, 2012

                                                        
               

Allowance for loan losses:

                                                        
               

Beginning balance

   $ 2,876     $ 10,571     $ 5,796     $ 974     $ 719     $ 321     $ 21,257  

Charge-offs

     (132 )      (776 )      (766 )      (105 )      (44 )      —         (1,823 ) 

Recoveries

     35       24       52       61       18       —         190  

Provision

     263       1,151       1,175       (73 )      (90 )      (26 )      2,400  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 3,042     $ 10,970     $ 6,257     $ 857     $ 603     $ 295     $ 22,024  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                         
    Commercial
& Agriculture		     Commercial
Real Estate		     Residential
Real Estate		     Real Estate
Construction		     Consumer     Unallocated     Total  

For the three months ending March 31, 2011

                                                        
               

Allowance for loan losses:

                                                        
               

Beginning balance

   $ 3,639     $ 9,827     $ 4,569     $ 2,139     $ 726     $ 868     $ 21,768  

Charge-offs

     (184 )      (130 )      (712 )      (249 )      (71 )      —         (1,346 ) 

Recoveries

     54       67       86       —         27       —         234  

Provision

     —         1,916       2,028       (178 )      8       (774 )      3,000  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 3,509     $ 11,680     $ 5,971     $ 1,712     $ 690     $ 94     $ 23,656  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                         
    Commercial     Commercial     Residential     Real Estate                    
    & Agriculture     Real Estate     Real Estate     Construction     Consumer     Unallocated     Total  

March 31, 2012

                                                        
               

Allowance for loan losses:

                                                        
               

Ending balance:

                                                        

Individually evaluated for impairment

   $ 558     $ 3,330     $ 829     $ 77     $ —       $ —       $ 4,794  
               

Ending balance:

                                                        

Collectively evaluated for impairment

   $ 2,484     $ 7,640     $ 5,428     $ 780     $ 603     $ 295     $ 17,230  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loan balances outstanding:

                                                        
               

Ending balance:

                                                        

Individually evaluated for impairment

   $ 5,214     $ 18,208     $ 3,936     $ 335     $ —               $ 27,693  
               

Ending balance:

                                                        

Collectively evaluated for impairment

   $ 70,040     $ 357,439     $ 259,015     $ 38,803     $ 10,657             $ 735,954  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

 

 

  

Ending Balance

   $ 75,254     $ 375,647     $ 262,951     $ 39,138     $ 10,657             $ 763,647  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

 

 

  

 

                                                         
    Commercial     Commercial     Residential     Real Estate                    
    & Agriculture     Real Estate     Real Estate     Construction     Consumer     Unallocated     Total  

Allowance for loan losses:

                                                        
               

December 31, 2011

                                                        
               

Allowance for loan losses:

                                                        
               

Ending balance:

                                                        

Individually evaluated for impairment

   $ 618     $ 3,094     $ 860     $ 239     $ —       $ —       $ 4,811  
               

Ending balance:

                                                        

Collectively evaluated for impairment

   $ 2,258     $ 7,477     $ 4,936     $ 735     $ 719     $ 321     $ 16,446  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loan balances outstanding:

                                                        
               

Ending balance:

                                                        

Individually evaluated for impairment

   $ 5,258     $ 17,700     $ 3,846     $ 576     $ —               $ 27,380  
               

Ending balance:

                                                        

Collectively evaluated for impairment

   $ 81,137     $ 354,152     $ 271,149     $ 39,214     $ 12,236             $ 757,888  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

 

 

  

Ending Balance

   $ 86,395     $ 371,852     $ 274,995     $ 39,790     $ 12,236             $ 785,268  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

 

 

  

 

The following table represents credit exposures by internally assigned grades for the period ended March 31, 2012 and December 31, 2011. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Corporation’s internal credit risk grading system is based on experiences with similarly graded loans.

The Corporation’s internally assigned grades are as follows:

 

  •  

Pass—loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

 

  •  

Special Mention—loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

 

  •  

Substandard—loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that Citizens will sustain some loss if the deficiencies are not corrected.

 

  •  

Doubtful—loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

 

  •  

Loss—loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

 

  •  

Unrated—Generally, consumer loans are not risk-graded, except when collateral is used for a business purpose.

 

                                                 
    Commercial                                
    &     Commercial     Residential     Real Estate              

March 31, 2012

   Agriculture     Real Estate     Real Estate     Construction     Consumer     Total  

Pass

   $ 63,599     $ 324,474     $ 86,832     $ 33,258     $ 627     $ 508,790  

Special Mention

     4,878       15,246       4,890       740       —         25,754  

Substandard

     6,777       35,927       16,660       2,688       11       62,063  

Doubtful

     —         —         —         —         —         —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 75,254     $ 375,647     $ 108,382     $ 36,686     $ 638     $ 596,607  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                 
    Commercial                                
    &     Commercial     Residential     Real Estate              

December 31, 2011

   Agriculture     Real Estate     Real Estate     Construction     Consumer     Total  

Pass

   $ 73,011     $ 319,084     $ 92,577     $ 31,697     $ 2,208     $ 518,577  

Special Mention

     4,358       15,321       5,071       702       —         25,452  

Substandard

     9,026       37,447       17,764       5,067       —         69,304  

Doubtful

     —         —         —         —         —         —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

   $ 86,395     $ 371,852     $ 115,412     $ 37,466     $ 2,208     $ 613,333  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following tables present performing and nonperforming loans based solely on payment activity for the period ended March 31, 2012 and December 31, 2011 that have not been assigned an internal risk grade. Payment activity is reviewed by management on a monthly basis to determine how loans are performing. Loans are considered to be nonperforming when they become 90 days past due. Nonperforming loans also include certain loans that have been modified in Troubled Debt Restructurings (TDRs) where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Corporation’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

 

                                 
    Residential     Real Estate              
March 31, 2012   Real Estate     Construction     Consumer     Total  

Performing

   $ 154,539     $ 2,452     $ 9,997     $ 166,988  

Nonperforming

     30       —         22       52  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 154,569     $ 2,452     $ 10,019     $ 167,040  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

                                 
    Residential     Real Estate              
December 31, 2011   Real Estate     Construction     Consumer     Total  

Performing

   $ 159,291     $ 2,324     $ 10,027     $ 171,642  

Nonperforming

     292       —         1       293  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 159,583     $ 2,324     $ 10,028     $ 171,935  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table includes an aging analysis of the recorded investment of past due loans outstanding as of March 31, 2012 and December 31, 2011.

 

                                                         
                                        Past Due  
    30-59     60-89                             90 Days  
    Days     Days     90 Days or     Total Past                 and  

March 31, 2012

   Past Due     Past Due     Greater     Due     Current     Total Loans     Accruing  

Commericial & Agriculture

   $ 413     $ 196     $ 1,331     $ 1,940     $ 73,314     $ 75,254     $ 511  

Commercial Real Estate

     2,556       2,990       9,668       15,214       360,433       375,647       —    

Residential Real Estate

     4,964       771       6,187       11,922       251,029       262,951       220  

Real Estate Construction

     —         —         1,507       1,507       37,631       39,138       1,053  

Consumer

     27       35       22       84       10,573       10,657       22  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 7,960     $ 3,992     $ 18,715     $ 30,667     $ 732,980     $ 763,647     $ 1,806  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                         
                                        Past Due  
    30-59     60-89                             90 Days  
    Days     Days     90 Days or     Total Past                 and  

December 31, 2011

   Past Due     Past Due     Greater     Due     Current     Total Loans     Accruing  

Commericial & Agriculture

   $ 229     $ 174     $ 509     $ 912     $ 85,483     $ 86,395     $ 19  

Commercial Real Estate

     4,156       1,369       9,466       14,991       356,861       371,852       737  

Residential Real Estate

     3,614       1,182       6,504       11,300       263,695       274,995       511  

Real Estate Construction

     —         —         45       45       39,745       39,790       45  

Consumer

     89       16       2       107       12,129       12,236       2  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 8,088     $ 2,741     $ 16,526     $ 27,355     $ 757,913     $ 785,268     $ 1,314  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Nonaccrual Loans: Loans are considered for nonaccrual status upon reaching 90 days delinquency, unless the loan is well secured and in the process of collection, although the Corporation may be receiving partial payments of interest and partial repayments of principal on such loans. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income.

The following table presents loans on nonaccrual status as of March 31, 2012 and December 31, 2011

 

                 
    March 31, 2012     December 31, 2011  

Commericial & Agriculture

   $ 965     $ 940  

Commercial Real Estate

     15,635       15,346  

Residential Real Estate

     8,676       8,915  

Real Estate Construction

     454       567  

Consumer

     11       —    
   

 

 

    

 

 

  

Total

   $ 25,741     $ 25,768  
   

 

 

    

 

 

  

 

Loan modifications that are considered troubled debt restructurings completed during the quarter ended March 31, 2012 were as follows:

 

                         
    For the Quarter Ended March 31, 2012  
          Pre-     Post-  
          Modification     Modification  
    Number     Outstanding     Outstanding  
    of     Recorded     Recorded  
    Contracts     Investment     Investment  

Commericial & Agriculture

     3     $ 45     $ 37  

Commercial Real Estate

     3       1,206       1,206  

Residential Real Estate

     —         —         —    

Real Estate Construction

     —         —         —    

Consumer

     —         —         —    
   

 

 

    

 

 

    

 

 

  

Total Loan Modifications

     6     $ 1,251     $ 1,243  
   

 

 

    

 

 

    

 

 

  

 

                         
    For the Twelve Month Period Ended March 31, 2011  
          Pre-     Post-  
          Modification     Modification  
    Number     Outstanding     Outstanding  
    of     Recorded     Recorded  
    Contracts     Investment     Investment  

Commericial & Agriculture

     —       $ —       $ —    

Commercial Real Estate

     —         —         —    

Residential Real Estate

     —         —         —    

Real Estate Construction

     —         —         —    

Consumer

     —         —         —    
   

 

 

    

 

 

    

 

 

  

Total Loan Modifications

     —       $ —       $ —    
   

 

 

    

 

 

    

 

 

  

Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a non-accrual loan. Recidivism occurs at a notably higher rate than do defaults on new origination loans, so modified loans present a higher risk of loss than do new origination loans.

During the three month period ended March 31, 2012, there were no defaults on any loans which were modified and considered TDRs during the twelve months previous to March 31, 2012.

 

Impaired Loans: Larger (greater than $350) commercial loans and commercial real estate loans, many of which are 60 days or more past due, are tested for impairment. These loans are analyzed to determine if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance.

The following table includes the recorded investment and unpaid principal balances for impaired financing receivables with the associated allowance amount, if applicable, as of March 31, 2012 and December 31, 2011.

 

                                         
          Unpaid           Average     Interest  
    Recorded     Principal     Related     Recorded     Income  

March 31, 2012

   Investment     Balance     Allowance     Investment     Recognized  

With no related allowance recorded:

                                        

Commericial & Agriculture

   $ 2,868     $ 5,415     $ —       $ 1,411     $ 37  

Commercial Real Estate

     6,408       7,471       —         6,643       113  

Residential Real Estate

     881       1,129       —         871       15  

Real Estate Construction

     —         37       —         117       1  
           

With an allowance recorded:

                                        

Commericial & Agriculture

   $ 2,346     $ 3,649     $ 558     $ 2,484     $ 53  

Commercial Real Estate

     11,800       14,290       3,330       11,029       146  

Residential Real Estate

     3,055       4,638       829       3,158       63  

Real Estate Construction

     335       863       77       339       —    
           

Total:

                                        

Commericial & Agriculture

   $ 5,214     $ 9,064     $ 558     $ 3,895     $ 90  

Commercial Real Estate

     18,208       21,761       3,330       17,672       259  

Residential Real Estate

     3,936       5,767       829       4,029       78  

Real Estate Construction

     335       900       77       456       1  

 

                                         
          Unpaid           Average     Interest  
    Recorded     Principal     Related     Recorded     Income  

December 31, 2011

   Investment     Balance     Allowance     Investment     Recognized  

With no related allowance recorded:

                                        

Commericial & Agriculture

   $ 2,914     $ 3,010     $ —       $ 1,892     $ 217  

Commercial Real Estate

     3,804       4,739       —         3,678       343  

Residential Real Estate

     862       953       —         1,468       60  

Real Estate Construction

     —         —         —         914       —    
           

With an allowance recorded:

                                        

Commericial & Agriculture

   $ 2,344     $ 3,645     $ 618     $ 2,822     $ 264  

Commercial Real Estate

     13,896       16,534       3,094       9,851       925  

Residential Real Estate

     2,984       4,127       860       2,283       202  

Real Estate Construction

     576       1,103       239       448       17  
           

Total:

                                        

Commericial & Agriculture

   $ 5,258     $ 6,655     $ 618     $ 4,714     $ 481  

Commercial Real Estate

     17,700       21,273       3,094       13,529       1,268  

Residential Real Estate

     3,846       5,080       860       3,751       262  

Real Estate Construction

     576       1,103       239       1,362       17