10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

x Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the quarterly period ended March 31, 2012

 

¨ Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the transition period from              to             

Commission file number 001-31940

 

 

F.N.B. CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Florida   25-1255406

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

One F.N.B. Boulevard, Hermitage, PA   16148
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: 724-981-6000

 

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer   x    Accelerated Filer   ¨
Non-accelerated Filer   ¨    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

  

Outstanding at April 30, 2012

Common Stock, $0.01 Par Value

   139,554,146 Shares

 

 

 


Table of Contents

F.N.B. CORPORATION

FORM 10-Q

March 31, 2012

INDEX

 

          PAGE  

PART I – FINANCIAL INFORMATION

  
Item 1.    Financial Statements   
   Consolidated Balance Sheets      2   
   Consolidated Statements of Comprehensive Income      3   
   Consolidated Statements of Stockholders’ Equity      4   
   Consolidated Statements of Cash Flows      5   
   Notes to Consolidated Financial Statements      6   
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations      46   
Item 3.    Quantitative and Qualitative Disclosures About Market Risk      62   
Item 4.    Controls and Procedures      62   

PART II – OTHER INFORMATION

  
Item 1.    Legal Proceedings      63   
Item 1A.    Risk Factors      63   
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds      63   
Item 3.    Defaults Upon Senior Securities      63   
Item 4.    Mine Safety Disclosures      63   
Item 5.    Other Information      64   
Item 6.    Exhibits      64   
Signatures         65   

 

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Table of Contents

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except par value

 

     March 31,     December 31,  
     2012     2011  
     (Unaudited)        

Assets

    

Cash and due from banks

   $ 192,346      $ 197,349   

Interest bearing deposits with banks

     72,376        11,604   
  

 

 

   

 

 

 

Cash and Cash Equivalents

     264,722        208,953   

Securities available for sale

     1,097,801        640,571   

Securities held to maturity (fair value of $1,212,826 and $952,033)

     1,178,558        917,212   

Residential mortgage loans held for sale

     11,618        14,275   

Loans, net of unearned income of $44,500 and $47,110

     7,802,792        6,856,667   

Allowance for loan losses

     (102,093     (100,662
  

 

 

   

 

 

 

Net Loans

     7,700,699        6,756,005   

Premises and equipment, net

     146,406        130,043   

Goodwill

     670,519        568,462   

Core deposit and other intangible assets, net

     43,657        30,953   

Bank owned life insurance

     236,753        208,927   

Other assets

     375,330        311,082   
  

 

 

   

 

 

 

Total Assets

   $ 11,726,063      $ 9,786,483   
  

 

 

   

 

 

 

Liabilities

    

Deposits:

    

Non-interest bearing demand

   $ 1,579,340      $ 1,340,465   

Savings and NOW

     4,706,748        3,790,863   

Certificates and other time deposits

     2,769,066        2,158,440   
  

 

 

   

 

 

 

Total Deposits

     9,055,154        7,289,768   

Other liabilities

     144,094        143,239   

Short-term borrowings

     877,828        851,294   

Long-term debt

     90,308        88,016   

Junior subordinated debt

     203,980        203,967   
  

 

 

   

 

 

 

Total Liabilities

     10,371,364        8,576,284   

Stockholders’ Equity

    

Common stock - $0.01 par value

    

Authorized – 500,000,000 shares

    

Issued – 139,812,706 and 127,436,261 shares

     1,393        1,268   

Additional paid-in capital

     1,363,956        1,224,572   

Retained earnings

     37,272        32,925   

Accumulated other comprehensive loss

     (43,735     (45,148

Treasury stock – 311,667 and 215,502 shares at cost

     (4,187     (3,418
  

 

 

   

 

 

 

Total Stockholders’ Equity

     1,354,699        1,210,199   
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 11,726,063      $ 9,786,483   
  

 

 

   

 

 

 

See accompanying Notes to Consolidated Financial Statements

 

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Table of Contents

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Dollars in thousands, except per share data

Unaudited

 

     Three Months Ended  
     March 31,  
     2012      2011  

Interest Income

     

Loans, including fees

   $ 93,138       $ 84,710   

Securities:

     

Taxable

     12,037         10,514   

Nontaxable

     1,721         1,947   

Dividends

     335         119   

Other

     56         81   
  

 

 

    

 

 

 

Total Interest Income

     107,287         97,371   

Interest Expense

     

Deposits

     11,958         14,595   

Short-term borrowings

     1,444         1,833   

Long-term debt

     953         1,628   

Junior subordinated debt

     2,011         2,032   
  

 

 

    

 

 

 

Total Interest Expense

     16,366         20,088   
  

 

 

    

 

 

 

Net Interest Income

     90,921         77,283   

Provision for loan losses

     6,572         8,228   
  

 

 

    

 

 

 

Net Interest Income After Provision for Loan Losses

     84,349         69,055   

Non-Interest Income

     

Service charges

     17,165         14,335   

Insurance commissions and fees

     4,172         4,146   

Securities commissions and fees

     2,011         1,972   

Trust fees

     3,734         3,710   

Gain on sale of securities

     108         54   

Gain on sale of residential mortgage loans

     809         767   

Bank owned life insurance

     1,559         1,232   

Other

     2,187         2,216   
  

 

 

    

 

 

 

Total Non-Interest Income

     31,745         28,432   

Non-Interest Expense

     

Salaries and employee benefits

     44,606         38,382   

Net occupancy

     6,606         5,910   

Equipment

     5,186         4,475   

Amortization of intangibles

     2,281         1,796   

Outside services

     6,367         5,200   

FDIC insurance

     1,971         2,719   

State taxes

     1,499         1,936   

Merger related

     6,994         4,146   

Other

     11,163         9,993   
  

 

 

    

 

 

 

Total Non-Interest Expense

     86,673         74,557   
  

 

 

    

 

 

 

Income Before Income Taxes

     29,421         22,930   

Income taxes

     7,839         5,755   
  

 

 

    

 

 

 

Net Income

   $ 21,582       $ 17,175   
  

 

 

    

 

 

 

Net Income per Share – Basic

   $ 0.16       $ 0.14   

Net Income per Share – Diluted

     0.15         0.14   

Cash Dividends per Share

     0.12         0.12   

Comprehensive Income

   $ 22,995       $ 17,228   
  

 

 

    

 

 

 

 

See accompanying Notes to Consolidated Financial Statements

 

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Table of Contents

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Dollars in thousands, except per share data

Unaudited

 

     Common
Stock
     Additional
Paid-In
Capital
    Retained
Earnings
    Accumulated
Other

Compre-
hensive
Loss
    Treasury
Stock
    Total  

Balance at January 1, 2012

   $ 1,268       $ 1,224,572      $ 32,925      $ (45,148   $ (3,418   $ 1,210,199   

Net income

          21,582            21,582   

Change in other comprehensive income, net of tax

            1,413          1,413   

Common stock dividends ($0.12/share)

          (16,858         (16,858

Issuance of common stock

     125         138,052        (377       (769     137,031   

Restricted stock compensation

        998              998   

Tax expense of stock-based compensation

        334              334   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2012

   $ 1,393       $ 1,363,956      $ 37,272      $ (43,735   $ (4,187   $ 1,354,699   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at January 1, 2011

   $ 1,143       $ 1,094,713      $ 6,564      $ (33,732   $ (2,564   $ 1,066,124   

Net income

          17,175            17,175   

Change in other comprehensive income, net of tax

            53          53   

Common stock dividends ($0.12/share)

          (14,403         (14,403

Issuance of common stock

     62         59,439            (837     58,664   

Restricted stock compensation

        867              867   

Tax expense of stock-based compensation

        (66           (66
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2011

   $ 1,205       $ 1,154,953      $ 9,336      $ (33,679   $ (3,401   $ 1,128,414   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying Notes to Consolidated Financial Statements

 

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F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in thousands

Unaudited

 

     Three Months Ended  
     March 31,  
     2012     2011  

Operating Activities

    

Net income

   $ 21,582      $ 17,175   

Adjustments to reconcile net income to net cash flows provided by operating activities:

    

Depreciation, amortization and accretion

     5,454        7,532   

Provision for loan losses

     6,572        8,228   

Deferred taxes

     10,195        1,577   

Gain on sale of securities

     (108     (54

Tax expense of stock-based compensation

     (334     66   

Net change in:

    

Interest receivable

     950        (664

Interest payable

     (2,457     (762

Trading securities

     331,972        110,490   

Residential mortgage loans held for sale

     2,657        6,446   

Bank owned life insurance

     (1,637     (669

Other, net

     (9,046     3,123   
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     365,800        152,488   
  

 

 

   

 

 

 

Investing Activities

    

Net change in loans

     (31,878     (79,454

Securities available for sale:

    

Purchases

     (474,224     (33,446

Sales

     15,414        10,849   

Maturities

     142,435        69,890   

Securities held to maturity:

    

Purchases

     (323,679     (189,984

Sales

     2,903        —     

Maturities

     72,385        62,355   

Purchase of bank owned life insurance

     (20,000     —     

Withdrawal/surrender of bank owned life insurance

     20,701        —     

Increase in premises and equipment

     (2,325     (2,705

Net cash received in business combinations

     203,538        23,361   
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (394,730     (139,134
  

 

 

   

 

 

 

Financing Activities

    

Net change in:

    

Non-interest bearing deposits, savings and NOW accounts

     353,871        222,959   

Time deposits

     (111,091     (22,192

Short-term borrowings

     13,593        (40,194

Increase in long-term debt

     5,695        8,244   

Decrease in long-term debt

     (162,069     (10,443

Decrease in junior subordinated debt

     13        (108

Net proceeds from issuance of common stock

     1,211        1,186   

Tax expense of stock-based compensation

     334        (66

Cash dividends paid

     (16,858     (14,403
  

 

 

   

 

 

 

Net cash flows provided by financing activities

     84,699        144,983   
  

 

 

   

 

 

 

Net Increase in Cash and Cash Equivalents

     55,769        158,337   

Cash and cash equivalents at beginning of period

     208,953        131,571   
  

 

 

   

 

 

 

Cash and Cash Equivalents at End of Period

   $ 264,722      $ 289,908   
  

 

 

   

 

 

 

See accompanying Notes to Consolidated Financial Statements

 

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F.N.B. CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except share data

(Unaudited)

March 31, 2012

BUSINESS

F.N.B. Corporation (the Corporation) is a diversified financial services company headquartered in Hermitage, Pennsylvania. Its primary businesses include community banking, consumer finance, wealth management and insurance. The Corporation also conducts commercial leasing and merchant banking activities. The Corporation operates its community banking business through a full service branch network in Pennsylvania, Ohio and West Virginia. The Corporation operates its wealth management and insurance businesses within the existing branch network. It also conducts selected consumer finance business in Pennsylvania, Ohio, Tennessee and Kentucky.

BASIS OF PRESENTATION

The Corporation’s accompanying consolidated financial statements and these notes to the financial statements include subsidiaries in which the Corporation has a controlling financial interest. The Corporation owns and operates First National Bank of Pennsylvania (FNBPA), First National Trust Company, First National Investment Services Company, LLC, F.N.B. Investment Advisors, Inc., First National Insurance Agency, LLC, Regency Finance Company (Regency), F.N.B. Capital Corporation, LLC and Bank Capital Services, LLC, and includes results for each of these entities in the accompanying consolidated financial statements.

The accompanying consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly reflect the Corporation’s financial position and results of operations in accordance with U.S. generally accepted accounting principles (GAAP). All significant intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation. Events occurring subsequent to the date of the balance sheet have been evaluated for potential recognition or disclosure in the consolidated financial statements through the date of the filing of the consolidated financial statements with the Securities and Exchange Commission (SEC).

Certain information and note disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The interim operating results are not necessarily indicative of operating results the Corporation expects for the full year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K filed with the SEC on February 28, 2012.

USE OF ESTIMATES

The accounting and reporting policies of the Corporation conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. Material estimates that are particularly susceptible to significant changes include the allowance for loan losses, securities valuations, goodwill and other intangible assets and income taxes.

COMMON STOCK

On May 18, 2011, the Corporation completed a public offering of 6,037,500 shares of common stock at a price of $10.70 per share, including 787,500 shares of common stock purchased by the underwriters pursuant to an over-allotment option, which the underwriters exercised in full. The net proceeds of the offering after deducting underwriting discounts and commissions and offering expenses were $62,803.

 

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MERGERS AND ACQUISITIONS

On January 1, 2012, the Corporation completed its acquisition of Parkvale Financial Corporation (Parkvale), a unitary savings and loan holding company based in Monroeville, Pennsylvania. On the acquisition date, Parkvale had $1,815,663 in assets, which included $937,350 in loans, and $1,505,671 in deposits. The acquisition, net of equity offering costs, was valued at $136,818 and resulted in the Corporation issuing 12,159,312 shares of its common stock in exchange for 5,582,846 shares of Parkvale common stock. The assets and liabilities of Parkvale were recorded on the Corporation’s balance sheet at their preliminary estimated fair values as of January 1, 2012, the acquisition date, and Parkvale’s results of operations have been included in the Corporation’s consolidated statement of income since that date. Parkvale’s banking affiliate, Parkvale Bank, was merged into FNBPA on January 1, 2012. In conjunction with the completion of this acquisition, the Corporation fully repaid the $31,762 of Parkvale preferred stock previously issued to the U.S. Department of the Treasury (UST) under the Capital Purchase Program (CPP). The warrant issued by Parkvale to the UST has been converted into a warrant to purchase up to 819,640 shares of the Corporation’s common stock. The warrant expires December 23, 2018 and has an exercise price of $5.81. Based on a preliminary purchase price allocation, the Corporation recorded $101,543 in goodwill and $14,984 in core deposit intangible as a result of the acquisition. The Corporation has recorded estimates of the fair values of acquired assets and liabilities. The fair values for loans, goodwill and other intangible assets, other assets and other liabilities are provisional amounts based on third party valuations that are currently under review. None of the goodwill is deductible for income tax purposes.

During the first three months of 2012, the Corporation recorded merger and integration charges of $6,994 associated with the Parkvale acquisition.

The following table shows the calculation of the purchase price and the resulting goodwill relating to the Parkvale acquisition:

 

Fair value of stock issued, net of offering costs

     $ 136,818   

Fair value of:

    

Tangible assets acquired

   $ 1,526,097     

Core deposit and other intangible assets acquired

     14,984     

Liabilities assumed

     (1,709,147  

Net cash received in the acquisition

     203,341     
  

 

 

   

Fair value of net assets acquired

       35,275   
    

 

 

 

Goodwill recognized

     $ 101,543   
    

 

 

 

The following table summarizes the fair value of the net assets that the Corporation acquired from Parkvale:

 

Assets

  

Cash and due from banks

   $ 203,538   

Securities

     486,233   

Loans

     922,056   

Goodwill and other intangible assets

     116,527   

Accrued income and other assets

     117,611   
  

 

 

 

Total assets

     1,845,965   

Liabilities

  

Deposits

     1,525,253   

Borrowings

     171,606   

Accrued expenses and other liabilities

     12,288   
  

 

 

 

Total liabilities

     1,709,147   
  

 

 

 

Purchase price

   $ 136,818   
  

 

 

 

On January 1, 2011, the Corporation completed its acquisition of Comm Bancorp, Inc. (CBI), a bank holding company based in Clarks Summit, Pennsylvania. On the acquisition date, CBI had $625,570 in assets, which included $445,271 in loans, and $561,775 in deposits. The transaction, valued at $75,547, resulted in the Corporation paying $17,203 in cash and issuing 5,941,287 shares of its common stock in exchange for 1,719,978 shares of CBI common stock. The assets and liabilities of CBI were recorded on the Corporation’s balance sheet at their fair values as of January 1, 2011,

 

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the acquisition date, and CBI’s results of operations have been included in the Corporation’s consolidated statement of income since that date. CBI’s banking affiliate, Community Bank and Trust Company, was merged into FNBPA on January 1, 2011. Based on the purchase price allocation, the Corporation recorded $40,256 in goodwill and $4,785 in core deposit intangible as a result of the acquisition. None of the goodwill is deductible for income tax purposes.

NEW ACCOUNTING STANDARDS

Comprehensive Income

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income, with the intention of increasing the prominence of other comprehensive income in the financial statements. The FASB has eliminated the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. Instead, in annual periods, companies are required to present components of net income and other comprehensive income and a total for comprehensive income in a single continuous statement of comprehensive income or two separate but consecutive statements. In interim periods, companies are required to present a total for comprehensive income in a single continuous statement of comprehensive income or two separate but consecutive statements. These requirements, which were applied retrospectively, were effective January 1, 2012. For interim periods, the Corporation has adopted the single continuous statement of comprehensive income approach. Adoption of this standard did not have a material effect on the financial statements, results of operations or liquidity of the Corporation.

Amendments to Fair Value Measurements

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurements, to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with GAAP and International Financial Reporting Standards (IFRSs). The amendments explain how to measure fair value. They do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices. The amendments result in common fair value measurement and disclosure requirements in GAAP and IFRS. Some of the amendments clarify the application of existing fair value measurement requirements and others change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. Many of the previous fair value requirements are not changed by this standard. The amendments in this standard, which were applied prospectively, were effective January 1, 2012. Adoption of this standard did not have a material effect on the financial statements, results of operations or liquidity of the Corporation.

SECURITIES

The amortized cost and fair value of securities are as follows:

Securities Available For Sale:

 

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair Value  

March 31, 2012

          

U.S. Treasury and other U.S. government agencies and corporations

   $ 366,075       $ 406       $ (632   $ 365,849   

Residential mortgage-backed securities:

          

Agency mortgage-backed securities

     337,045         5,675         (66     342,654   

Agency collateralized mortgage obligations

     299,109         3,221         —          302,330   

Non-agency collateralized mortgage obligations

     3,866         1         (25     3,842   

States of the U.S. and political subdivisions

     33,359         1,532         —          34,891   

Collateralized debt obligations

     36,161         418         (13,774     22,805   

Other debt securities

     23,853         567         (1,398     23,022   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

     1,099,468         11,820         (15,895     1,095,393   

Equity securities

     2,055         369         (16     2,408   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 1,101,523       $ 12,189       $ (15,911   $ 1,097,801   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair Value  

December 31, 2011

          

U.S. Treasury and other U.S. government agencies and corporations

   $ 231,187       $ 642       $ —        $ 231,829   

Residential mortgage-backed securities:

          

Agency mortgage-backed securities

     166,758         4,853         —          171,611   

Agency collateralized mortgage obligations

     181,493         2,236         —          183,729   

Non-agency collateralized mortgage obligations

     31         —           (1     30   

States of the U.S. and political subdivisions

     38,509         1,841         —          40,350   

Collateralized debt obligations

     19,224         —           (13,226     5,998   

Other debt securities

     6,863         —           (1,666     5,197   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

     644,065         9,572         (14,893     638,744   

Equity securities

     1,593         257         (23     1,827   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 645,658       $ 9,829       $ (14,916   $ 640,571   
  

 

 

    

 

 

    

 

 

   

 

 

 

Securities Held To Maturity:

 

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair Value  

March 31, 2012

          

U.S. Treasury and other U.S. government agencies and corporations

   $ 4,441       $ 340       $ —        $ 4,781   

Residential mortgage-backed securities:

          

Agency mortgage-backed securities

     888,484         29,006         (471     917,019   

Agency collateralized mortgage obligations

     115,104         731         (88     115,747   

Non-agency collateralized mortgage obligations

     19,652         107         (1,313     18,446   

States of the U.S. and political subdivisions

     147,990         6,236         (81     154,145   

Collateralized debt obligations

     1,563         —           (176     1,387   

Other debt securities

     1,324         —           (23     1,301   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 1,178,558       $ 36,420       $ (2,152   $ 1,212,826   
  

 

 

    

 

 

    

 

 

   

 

 

 

December 31, 2011

          

U.S. Treasury and other U.S. government agencies and corporations

   $ 4,523       $ 360       $ —        $ 4,883   

Residential mortgage-backed securities:

          

Agency mortgage-backed securities

     683,100         28,722         —          711,822   

Agency collateralized mortgage obligations

     54,319         573         (11     54,881   

Non-agency collateralized mortgage obligations

     24,348         143         (1,373     23,118   

States of the U.S. and political subdivisions

     147,748         6,877         —          154,625   

Collateralized debt obligations

     1,592         —           (314     1,278   

Other debt securities

     1,582         25         (181     1,426   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 917,212       $ 36,700       $ (1,879   $ 952,033   
  

 

 

    

 

 

    

 

 

   

 

 

 

The Corporation classifies securities as trading securities when management intends to sell such securities in the near term. Such securities are carried at fair value, with unrealized gains (losses) reflected through the consolidated statement of income. The Corporation classified certain securities acquired in conjunction with the Parkvale and CBI acquisitions as trading securities. The Corporation both acquired and sold these trading securities during the quarters in which each of these acquisitions occurred. As of March 31, 2012 and December 31, 2011, the Corporation did not hold any trading securities.

 

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Gross gains and gross losses were realized on securities as follows:

 

     Three Months Ended  
     March 31,  
     2012     2011  

Gross gains

   $ 349      $ 250   

Gross losses

     (241     (196
  

 

 

   

 

 

 
   $ 108      $ 54   
  

 

 

   

 

 

 

As of March 31, 2012, the amortized cost and fair value of securities, by contractual maturities, were as follows:

 

     Available for Sale      Held to Maturity  
     Amortized
Cost
     Fair
Value
     Amortized
Cost
     Fair
Value
 

Due in one year or less

   $ 27,164       $ 27,213       $ 7,731       $ 7,826   

Due from one to five years

     346,262         346,200         12,313         12,873   

Due from five to ten years

     21,405         22,401         43,678         45,470   

Due after ten years

     64,617         50,753         91,596         95,445   
  

 

 

    

 

 

    

 

 

    

 

 

 
     459,448         446,567         155,318         161,614   

Residential mortgage-backed securities:

           

Agency mortgage-backed securities

     337,045         342,654         888,484         917,019   

Agency collateralized mortgage obligations

     299,109         302,330         115,104         115,747   

Non-agency collateralized mortgage obligations

     3,866         3,842         19,652         18,446   

Equity securities

     2,055         2,408         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,101,523       $ 1,097,801       $ 1,178,558       $ 1,212,826   
  

 

 

    

 

 

    

 

 

    

 

 

 

Maturities may differ from contractual terms because borrowers may have the right to call or prepay obligations with or without penalties. Periodic payments are received on mortgage-backed securities based on the payment patterns of the underlying collateral.

At March 31, 2012 and December 31, 2011, securities with a carrying value of $587,865 and $547,727, respectively, were pledged to secure public deposits, trust deposits and for other purposes as required by law. Securities with a carrying value of $747,289 and $680,212 at March 31, 2012 and December 31, 2011, respectively, were pledged as collateral for short-term borrowings.

Following are summaries of the fair values and unrealized losses of securities, segregated by length of impairment:

Securities available for sale:

 

     Less than 12 Months     Greater than 12 Months     Total  
     Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
 

March 31, 2012

               

U.S. Treasury and other U.S. government agencies and corporations

   $ 169,327       $ (632   $ —         $ —        $ 169,327       $ (632

Residential mortgage-backed securities:

               

Agency mortgage-backed securities

     76,778         (66     —           —          76,778         (66

Non-agency collateralized mortgage obligations

     3,812         (25     —           —          3,812         (25

Collateralized debt obligations

     8,453         (544     6,042         (13,230     14,495         (13,774

Other debt securities

     —           —          5,467         (1,398     5,467         (1,398

Equity securities

     729         (16     —           —          729         (16
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
   $ 259,099       $ (1,283   $ 11,509       $ (14,628   $ 270,608       $ (15,911
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

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     Less than 12 Months     Greater than 12 Months     Total  
     Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
 

December 31, 2011

               

Residential mortgage-backed securities:

               

Non-agency collateralized mortgage obligations

   $ 30       $ (1   $ —         $ —        $ 30       $ (1

Collateralized debt obligations

     —           —          5,998         (13,226     5,998         (13,226

Other debt securities

     —           —          5,197         (1,666     5,197         (1,666

Equity securities

     100         (9     659         (14     759         (23
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
   $ 130       $ (10   $ 11,854       $ (14,906   $ 11,984       $ (14,916
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

Securities held to maturity:

 

      
     Less than 12 Months     Greater than 12 Months     Total  
     Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
 

March 31, 2012

               

Residential mortgage-backed securities:

               

Agency mortgage-backed securities

   $ 143,873       $ (471   $ —         $ —        $ 143,873       $ (471

Agency collateralized mortgage obligations

     19,943         (88     —           —          19,943         (88

Non-agency collateralized mortgage obligations

     5,202         (114     4,322         (1,199     9,524         (1,313

States of the U.S. and political subdivisions

     4,455         (81     —           —          4,455         (81

Collateralized debt obligations

     —           —          1,387         (176     1,387         (176

Other debt securities

     —           —          1,301         (23     1,301         (23
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
   $ 173,473       $ (754   $ 7,010       $ (1,398   $ 180,483       $ (2,152
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

December 31, 2011

               

Residential mortgage-backed securities:

               

Agency collateralized mortgage obligations

   $ 12,911       $ (11   $ —         $ —        $ 12,911       $ (11

Non-agency collateralized mortgage obligations

     5,374         (64     4,351         (1,309     9,725         (1,373

Collateralized debt obligations

     —           —          1,278         (314     1,278         (314

Other debt securities

     —           —          1,144         (181     1,144         (181
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
   $ 18,285       $ (75   $ 6,773       $ (1,804   $ 25,058       $ (1,879
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

As of March 31, 2012, securities with unrealized losses for less than 12 months include 10 investments in U.S. Treasury and other U.S. government agencies and corporations, 15 investments in residential mortgage-backed securities (10 investments in agency mortgage-backed securities, 1 investment in an agency collateralized mortgage obligation (CMO) and 4 investments in non-agency CMOs), 3 investments in states of the U.S. and political subdivisions, 8 investments in collateralized debt obligations (CDOs) and 2 investments in equity securities. Securities with unrealized losses of greater than 12 months include 1 investment in a residential mortgage-backed security (non-agency CMO), 13 investments in CDOs, and 5 investments in other debt securities as of March 31, 2012. The Corporation does not intend to sell the debt securities and it is not more likely than not the Corporation will be required to sell the securities before recovery of their amortized cost basis.

The Corporation’s unrealized losses on CDOs relate to investments in trust preferred securities (TPS). The Corporation’s portfolio of TPS consists of single-issuer and pooled securities. The single-issuer securities are primarily from money-center and large regional banks. The pooled securities consist of securities issued primarily by banks and thrifts, with some of the pools including a limited number of insurance companies. Investments in pooled securities are all in mezzanine tranches except for one investment in a senior tranche, and are secured by over-collateralization or default protection provided by subordinated tranches. The non-credit portion of unrealized losses on investments in TPS is attributable to temporary illiquidity and the uncertainty affecting these markets, as well as changes in interest rates.

 

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Other-Than-Temporary Impairment

The Corporation evaluates its investment securities portfolio for other-than-temporary impairment (OTTI) on a quarterly basis. Impairment is assessed at the individual security level. The Corporation considers an investment security impaired if the fair value of the security is less than its cost or amortized cost basis.

When impairment of an equity security is considered to be other-than-temporary, the security is written down to its fair value and an impairment loss is recorded as a loss within non-interest income in the consolidated statement of income. When impairment of a debt security is considered to be other-than-temporary, the amount of the OTTI recorded as a loss within non-interest income and thereby recognized in earnings depends on whether the Corporation intends to sell the security or whether it is more likely than not that the Corporation will be required to sell the security before recovery of its amortized cost basis.

If the Corporation intends to sell the debt security or more likely than not will be required to sell the security before recovery of its amortized cost basis, OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value.

If the Corporation does not intend to sell the debt security and it is not more likely than not the Corporation will be required to sell the security before recovery of its amortized cost basis, OTTI shall be separated into the amount representing credit loss and the amount related to all other market factors. The amount related to credit loss shall be recognized in earnings. The amount related to other market factors shall be recognized in other comprehensive income, net of applicable taxes.

The Corporation performs its OTTI evaluation process in a consistent and systematic manner and includes an evaluation of all available evidence. Documentation of the process is as extensive as necessary to support a conclusion as to whether a decline in fair value below cost or amortized cost is temporary or other-than-temporary and includes documentation supporting both observable and unobservable inputs and a rationale for conclusions reached. In making these determinations for pooled TPS, the Corporation consults with third-party advisory firms to provide additional valuation assistance.

This process considers factors such as the severity, length of time and anticipated recovery period of the impairment, recoveries or additional declines in fair value subsequent to the balance sheet date, recent events specific to the issuer, including investment downgrades by rating agencies and economic conditions in its industry, and the issuer’s financial condition, repayment capacity, capital strength and near-term prospects.

For debt securities, the Corporation also considers the payment structure of the debt security, the likelihood of the issuer being able to make future payments, failure of the issuer of the security to make scheduled interest and principal payments, whether the Corporation has made a decision to sell the security and whether the Corporation’s cash or working capital requirements or contractual or regulatory obligations indicate that the debt security will be required to be sold before a forecasted recovery occurs. For equity securities, the Corporation also considers its intent and ability to retain the security for a period of time sufficient to allow for a recovery in fair value. Among the factors that the Corporation considers in determining its intent and ability to retain the security is a review of its capital adequacy, interest rate risk position and liquidity. The assessment of a security’s ability to recover any decline in fair value, the ability of the issuer to meet contractual obligations, the Corporation’s intent and ability to retain the security, and whether it is more likely than not the Corporation will be required to sell the security before recovery of its amortized cost basis require considerable judgment.

Debt securities with credit ratings below AA at the time of purchase that are repayment-sensitive securities are evaluated using the guidance of ASC 325, Investments - Other. All other securities are required to be evaluated under ASC 320, Investments – Debt Securities.

The Corporation invested in TPS issued by special purpose vehicles (SPVs) which hold pools of collateral consisting of trust preferred and subordinated debt securities issued by banks, bank holding companies, thrifts and insurance companies. The securities issued by the SPVs are generally segregated into several classes known as tranches. Typically, the structure includes senior, mezzanine and equity tranches. The equity tranche represents the first loss position. The Corporation generally holds interests in mezzanine tranches. Interest and principal collected from the collateral held by the SPVs are distributed with a priority that provides the highest level of protection to the senior-most tranches. In order to provide a high level of protection to the senior tranches, cash flows are diverted to higher-level tranches if the principal and interest coverage tests are not met.

 

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The Corporation prices its holdings of TPS using Level 3 inputs in accordance with ASC 820, Fair Value Measurements and Disclosures, and guidance issued by the SEC. In this regard, the Corporation evaluates current available information in estimating the future cash flows of these securities and determines whether there have been favorable or adverse changes in estimated cash flows from the cash flows previously projected. The Corporation considers the structure and term of the pool and the financial condition of the underlying issuers. Specifically, the evaluation incorporates factors such as over-collateralization and interest coverage tests, interest rates and appropriate risk premiums, the timing and amount of interest and principal payments and the allocation of payments to the various tranches. Current estimates of cash flows are based on the most recent trustee reports, announcements of deferrals or defaults, and assumptions regarding expected future default rates, prepayment and recovery rates and other relevant information. In constructing these assumptions, the Corporation considers the following:

 

   

that current defaults would have no recovery;

 

   

that some individually analyzed deferrals will cure at rates varying from 10% to 90% after the deferral period ends;

 

   

recent historical performance metrics, including profitability, capital ratios, loan charge-offs and loan reserve ratios, for the underlying institutions that would indicate a higher probability of default by the institution;

 

   

that institutions identified as possessing a higher probability of default would recover at a rate of 10% for banks and 15% for insurance companies;

 

   

that financial performance of the financial sector continues to be affected by the economic environment resulting in an expectation of additional deferrals and defaults in the future;

 

   

whether the security is currently deferring interest; and

 

   

the external rating of the security and recent changes to its external rating.

The primary evidence utilized by the Corporation is the level of current deferrals and defaults, the level of excess subordination that allows for receipt of full principal and interest, the credit rating for each security and the likelihood that future deferrals and defaults will occur at a level that will fully erode the excess subordination based on an assessment of the underlying collateral. The Corporation combines the results of these factors considered in estimating the future cash flows of these securities to determine whether there has been an adverse change in estimated cash flows from the cash flows previously projected.

The Corporation’s portfolio of trust preferred CDOs consists of 29 pooled issues and six single issue securities. Two of the pooled issues are senior tranches; the remaining 27 are mezzanine tranches. At March 31, 2012, the 29 pooled TPS had an estimated fair value of $24,192 while the single-issuer TPS had an estimated fair value of $7,786. The Corporation has concluded from the analysis performed at March 31, 2012 that it is probable that the Corporation will collect all contractual principal and interest payments on all of its single-issuer and pooled TPS sufficient to recover the amortized cost basis of the securities.

The Corporation did not recognize any impairment losses on securities for the three months ended March 31, 2012 and 2011.

At March 31, 2012, nine of the 12 pooled TPS on which OTTI has been previously recognized were classified as non-performing investments. The other three of the 12 investments on which OTTI was taken in prior years have returned to performing status due to improvements in expected cash flows with income of $133 accreted beginning in the first quarter of 2012.

 

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The following table presents a summary of the cumulative credit-related OTTI charges recognized as components of earnings for securities for which a portion of an OTTI is recognized in other comprehensive income:

 

     March 31,
2012
    December 31,
2011
 

Beginning balance of the amount related to credit loss for which a portion of OTTI was recognized in other comprehensive income

   $ (18,398   $ (18,332

Additions related to credit loss for securities with previously recognized OTTI

     —          (37

Additions related to credit loss for securities with initial OTTI

     —          (29
  

 

 

   

 

 

 

Ending balance of the amount related to credit loss for which a portion of OTTI was recognized in other comprehensive income

   $ (18,398   $ (18,398
  

 

 

   

 

 

 

TPS continue to experience price volatility as the secondary market for such securities remains limited. Write-downs, when required, are based on an individual security’s credit performance and its ability to make its contractual principal and interest payments. Should credit quality deteriorate to a greater extent than projected, it is possible that additional write-downs may be required. The Corporation monitors actual deferrals and defaults as well as expected future deferrals and defaults to determine if there is a high probability for expected losses and contractual shortfalls of interest or principal, which could warrant further impairment. The Corporation evaluates its entire TPS portfolio each quarter to determine if additional write-downs are warranted.

 

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The following table provides information relating to the Corporation’s TPS as of March 31, 2012:

 

$(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532)

Deal Name

   Class    Current
Par
Value
     Amortized
Cost
     Fair
Value
     Unrealized
Loss
    Lowest
Credit

Ratings
   Number of
Issuers

Currently
Performing
     Actual
Defaults (as

a percent of
original
collateral)
     Actual
Deferrals (as
a percent of
original
collateral)
     Projected
Recovery
Rates on
Current
Deferrals (1)
     Expected
Defaults (%)
(2)
     Excess
Subordination
(as a percent
of current
collateral) (3)
 

Pooled TPS:

                                  

P1

   C1    $ 5,500       $ 2,312       $ 958       $ (1,354   C      43         21         13         41         11         0.00   

P2

   C1      4,889         2,794         785         (2,009   C      44         16         14         30         12         0.00   

P3

   C1      5,561         4,218         1,145         (3,073   C      46         13         10         33         13         0.00   

P4

   C1      3,994         2,891         822         (2,069   C      51         15         9         38         13         0.00   

P5

   MEZ      474         297         215         (82   C      14         19         7         75         10         0.00   

P6

   MEZ      1,909         999         571         (428   C      14         21         15         39         11         0.00   

P7

   B3      2,000         726         319         (407   C      19         29         13         47         10         0.00   

P8

   B1      3,028         2,386         682         (1,704   C      49         14         21         41         12         0.00   

P9

   C      5,048         756         238         (518   C      33         14         31         42         11         0.00   

P10

   C      507         461         63         (398   C      47         13         19         31         11         0.00   

P11

   C      2,010         788         112         (676   C      39         16         17         42         13         0.00   

P12

   A4L      2,000         645         132         (513   C      22         16         26         53         12         0.00   
     

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total OTTI

     36,920         19,273         6,042         (13,231        421         17         16         40         12      
     

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

P13

   SNR      1,506         1,564         1,387         (177   BBB      11         15         14         43         10         77.27   

P14

   C1      5,219         866         909         43      C      43         21         13         41         11         0.00   

P15

   A2A      5,000         1,995         1,948         (47   CCC      44         16         14         30         12         43.23   

P16

   C1      4,781         1,064         985         (79   C      46         13         10         33         13         0.00   

P17

   C1      5,260         1,010         1,083         73      C      51         15         9         38         13         0.00   

P18

   C1      5,190         837         706         (131   C      56         14         18         33         14         0.00   

P19

   C1      3,206         320         173         (147   C      42         19         15         37         14         0.00   

P20

   C      3,339         504         618         114      C      35         15         19         33         15         0.00   

P21

   B      2,069         559         549         (10   C      34         12         25         33         16         20.04   

P22

   B2      5,000         2,145         2,176         31      CCC      21         0         8         10         10         41.76   

P23

   MEZ      1,894         567         566         (1   C      14         21         15         39         11         0.00   

P24

   B2      1,000         268         270         2      C      47         13         15         27         14         3.30   

P25

   B      4,008         895         933         38      C      39         16         17         42         13         10.49   

P26

   SNR      4,344         2,534         2,511         (23   CCC      50         21         7         40         12         48.61   

P27

   B      5,000         1,195         1,202         7      C      17         16         8         32         11         0.00   

P28

   C1      5,531         1,120         1,015         (105   C      27         15         13         41         10         0.00   

P29

   C1      5,606         1,008         1,119         111      C      26         16         13         48         11         0.00   
     

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Not OTTI

     67,953         18,451         18,150         (301        603         15         13         35         13      
     

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Pooled TPS

   $ 104,873       $ 37,724       $ 24,192       $ (13,532        1,024         16         14         38         12      
     

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Following is information about the Corporation’s PCI loans:

 

 

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$(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532) $(13,532)

Deal Name

   Class    Current
Par
Value
     Amortized
Cost
     Fair
Value
     Unrealized
Loss
    Lowest
Credit

Ratings
   Number of
Issuers

Currently
Performing
     Actual
Defaults (as

a percent of
original
collateral)
   Actual
Deferrals (as
a percent of
original
collateral)
   Projected
Recovery
Rates on
Current
Deferrals (1)
   Expected
Defaults (%)
(2)
   Excess
Subordination
(as a percent
of current
collateral) (3)

Single Issuer TPS:

                                  

S1

      $ 2,000       $ 1,950       $ 1,400       $ (550   BB      1                  

S2

        2,000         1,916         1,522         (394   BBB      1                  

S3

        1,000         954         1,018         64      BB-      1                  

S4

        2,000         2,000         1,840         (160   BB      1                  

S5

        1,000         999         705         (294   BB      1                  

S6

        1,300         1,324         1,301         (23   BB      1                  
     

 

 

    

 

 

    

 

 

    

 

 

      

 

 

                

Total Single Issuer TPS

      $ 9,300       $ 9,143       $ 7,786       $ (1,357        6                  
     

 

 

    

 

 

    

 

 

    

 

 

      

 

 

                

Total TPS

      $ 114,173       $ 46,867       $ 31,978       $ (14,889        1,030                  
     

 

 

    

 

 

    

 

 

    

 

 

      

 

 

                

 

(1) Some current deferrals will cure at rates varying from 10% to 90% after five years.
(2) Expected future defaults as a percent of remaining performing collateral.
(3) Excess subordination represents the additional defaults in excess of both current and projected defaults that the CDO can absorb before the bond experiences any credit impairment.

 

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Table of Contents

States of the U.S. and Political Subdivisions

The Corporation’s municipal bond portfolio of $182,881 as of March 31, 2012 is highly rated with an average rating of AA and 99.8% of the portfolio rated A or better. General obligation bonds comprise 99.5% of the portfolio. Geographically, the municipal bonds support the Corporation’s footprint as 76.8% of the securities are from municipalities located throughout Pennsylvania. The average holding size of the securities in the municipal bond portfolio is $1,010. This portfolio is also supported by underlying insurance as 77.4% of the securities have credit support.

Non-Agency CMOs

The Corporation purchased $161,151 of non-agency CMOs from 2003 through 2005. At the time of purchase, these securities were all rated AAA, with an original average loan-to-value (LTV) ratio of 66.1% and original credit score of 724. At origination, the credit support, or the amount of loss the collateral pool could absorb before the AAA securities would incur a credit loss, ranged from 2.0% to 7.0%. Since the time of these original purchases, all of which are classified as held to maturity, two holdings have been sold and one holding has paid off. The Corporation acquired an additional $42,870 of non-agency CMOs from acquisitions, retaining $4,298 and selling $38,572. These acquired securities are classified as available for sale. Non-agency CMOs have a book value of $23,518 at March 31, 2012. Paydowns during the first three months of 2012 amounted to $2,704, an annualized paydown rate of 37.7%. The credit support range at March 31, 2012 was 4.0% to 20.5%, due to paydowns, continued good credit performance and the sale of one non-agency CMO having a book value of $2,848 during the first quarter of 2012. National delinquencies, an early warning sign of potential default, have been increasing for the past five years. The slight upward trend of the rate of delinquencies throughout 2011 has continued through the first quarter of 2012. All non-agency CMO holdings are current with regards to principal and interest.

The rating agencies monitor the underlying collateral performance of these non-agency CMOs for delinquencies, foreclosures and defaults. They also factor in trends in bankruptcies and housing values to ultimately arrive at an expected loss for a given piece of defaulted collateral. Based on deteriorating performance of the collateral, many of these types of securities have been downgraded by the rating agencies. For the Corporation’s portfolio, six of the eleven non-agency CMOs have been downgraded since the original purchase date.

The Corporation determines its credit-related losses by running scenario analysis on the underlying collateral. This analysis applies default assumptions to delinquencies already in the pipeline, projects future defaults based in part on the historical trends for the collateral, applies a rate of severity and estimates prepayment rates. Because of the limited historical trends for the collateral, multiple default scenarios were analyzed including scenarios that significantly elevate defaults over the next 12—18 months. Based on the results of the analysis, the Corporation’s management has concluded that there are currently no credit-related losses in its non-agency CMO portfolio. The one non-agency CMO that incurred a credit-related loss in 2011 was sold in March 2012 as a result of further credit deterioration and resulted in a net loss on sale of $226, which was recognized in first quarter 2012 earnings.

 

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Table of Contents

The following table provides information relating to the Corporation’s non-agency CMOs as of March 31, 2012:

 

                                 Subordination Data  
                   Credit Rating      Credit Support %      Delinquency %                           %      Original      Original  

Security

   Original
Year
     Book
Value (1)
     S&P      Moody’s      Original      Current      .
30 Day
     60 Day      90 Day      %
Foreclosure
     %
OREO
     %
Bankruptcy
     Total
Delinquency
     %
LTV
     Credit
Score
 

1

     2003       $ 2,368         AAA         n/a         2.5         6.3         1.1         0.4         0.8         0.9         0.0         1.6         4.9         51.3         736   

2

     2003         1,759         AAA         n/a         4.3         17.0         2.2         1.2         3.6         3.3         0.7         1.3         12.2         55.3         709   

3

     2003         1,075         AAA         n/a         2.0         7.0         0.5         0.6         0.3         3.6         0.0         0.5         5.5         46.4         740   

4

     2003         1,081         AAA         n/a         2.7         19.3         2.3         0.0         0.2         3.1         0.6         2.2         8.4         48.9         n/a   

5

     2003         3,838         AAA         n/a         2.5         5.0         1.0         0.2         0.9         1.6         0.0         0.6         4.4         50.5         731   

6

     2004         3,269         AAA         Baa2         7.0         20.5         2.2         0.8         2.7         10.0         0.7         0.9         17.3         54.6         690   

7

     2004         2,087         AA+         n/a         5.3         10.4         0.3         0.0         3.1         4.0         0.0         1.1         8.5         45.8         732   

8

     2004         971         n/a         A1         2.5         9.3         1.2         0.0         1.2         5.9         0.0         0.0         8.4         54.6         733   

9

     2004         1,522         AAA         Baa2         4.4         9.4         1.5         0.9         0.6         2.8         0.4         1.3         7.4         54.5         733   

10

     2005         5,520         CCC         Caa1         5.1         4.0         4.5         0.8         6.8         11.6         2.0         2.6         28.3         65.1         705   
     

 

 

          

 

 

    

 

 

                         

 

 

    

 

 

 
      $ 23,490               4.0         9.6                              54.7         718   
     

 

 

          

 

 

    

 

 

                         

 

 

    

 

 

 

 

(1) One acquired available for sale non-agency CMO with a March 31, 2012 book value of $28 is not included in the above table. The bond rating at acquisition was AAA and is now Baa2. This non-agency CMO is current with regards to principal and interest.

 

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Table of Contents

FEDERAL HOME LOAN BANK STOCK

The Corporation is a member of the Federal Home Loan Bank (FHLB) of Pittsburgh. The FHLB requires members to purchase and hold a specified minimum level of FHLB stock based upon their level of borrowings, collateral balances and participation in other programs offered by the FHLB. Stock in the FHLB is non-marketable and is redeemable at the discretion of the FHLB. Both cash and stock dividends on FHLB stock are reported as income.

Members do not purchase stock in the FHLB for the same reasons that traditional equity investors acquire stock in an investor-owned enterprise. Rather, members purchase stock to obtain access to the low-cost products and services offered by the FHLB. Unlike equity securities of traditional for-profit enterprises, the stock of FHLB does not provide its holders with an opportunity for capital appreciation because, by regulation, FHLB stock can only be purchased, redeemed and transferred at par value.

At March 31, 2012 and December 31, 2011, the Corporation’s FHLB stock totaled $32,894 and $23,516, respectively, and is included in other assets on the balance sheet. The increase is a result of the Parkvale acquisition. The Corporation accounts for the stock in accordance with ASC 325, which requires the investment to be carried at cost and evaluated for impairment based on the ultimate recoverability of the par value.

The Corporation periodically evaluates its FHLB investment for possible impairment based on, among other things, the capital adequacy of the FHLB and its overall financial condition. The Federal Housing Finance Agency, the regulator of the FHLB, requires it to maintain a total capital-to-assets ratio of at least 4.0%. At December 31, 2011, the FHLB’s capital ratio of 7.4% exceeded the regulatory requirement. Failure by the FHLB to meet this regulatory capital requirement would require an in-depth analysis of other factors including:

 

   

the member’s ability to access liquidity from the FHLB;

 

   

the member’s funding cost advantage with the FHLB compared to alternative sources of funds;

 

   

a decline in the market value of FHLB's net assets relative to book value which may or may not affect future financial performance or cash flow;

 

   

the FHLB’s ability to obtain credit and source liquidity, for which one indicator is the credit rating of the FHLB;

 

   

the FHLB’s commitment to make payments taking into account its ability to meet statutory and regulatory payment obligations and the level of such payments in relation to the FHLB’s operating performance; and

 

   

the prospects of amendments to laws that affect the rights and obligations of the FHLB.

At March 31, 2012, the Corporation believes its holdings in the stock are ultimately recoverable at par value and, therefore, determined that FHLB stock was not other-than-temporarily impaired. In addition, the Corporation has ample liquidity and does not require redemption of its FHLB stock in the foreseeable future.

LOANS AND ALLOWANCE FOR LOAN LOSSES

Following is a summary of loans, net of unearned income:

 

     March 31,
2012
     December 31,
2011
 

Commercial real estate

   $ 2,521,571       $ 2,341,646   

Commercial real estate – FL

     135,547         154,081   

Commercial and industrial

     1,451,144         1,363,692   

Commercial leases

     118,050         110,795   
  

 

 

    

 

 

 

Total commercial loans and leases

     4,226,312         3,970,214   

Direct installment

     1,082,964         1,029,187   

Residential mortgages

     1,187,448         670,936   

Indirect installment

     563,929         540,789   

Consumer lines of credit

     704,773         607,280   

Other

     37,366         38,261   
  

 

 

    

 

 

 
   $ 7,802,792       $ 6,856,667   
  

 

 

    

 

 

 

 

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Table of Contents

Commercial loans include both owner occupied and non-owner occupied loans secured by commercial properties, as well as commercial and industrial loans. Commercial leases consist of loans for new or used equipment. Direct installment is comprised of fixed-rate, closed-end consumer loans for personal, family or household use, such as home equity loans and automobile loans. Residential mortgages consist of conventional and jumbo mortgage loans for non-commercial properties. Indirect installment is comprised of loans written by third parties, primarily automobile loans. Consumer lines of credit include home equity lines of credit (HELOC) and consumer lines of credit that are either unsecured or secured by collateral other than home equity. Other is comprised primarily of mezzanine loans and student loans.

The loan portfolio consists principally of loans to individuals and small- and medium-sized businesses within the Corporation’s primary market area of Pennsylvania and northeastern Ohio. The portfolio also includes commercial real estate loans in Florida, of which 32% were land-related and 68% were non land-related as of March 31, 2012. Additionally, the portfolio contains consumer finance loans to individuals in Pennsylvania, Ohio, Tennessee and Kentucky, which totaled $157,885 or 2.0% of total loans as of March 31, 2012, compared to $163,856 or 2.4% of total loans as of December 31, 2011. Due to the relative insignificance of these consumer finance loans and the lower risk profile relative to the Florida loans, they are not segregated from other consumer loans.

As of March 31, 2012, approximately 54% of the commercial real estate loans, including those in Florida, were owner-occupied, while the remaining 46% were non-owner-occupied. As of March 31, 2012 and December 31, 2011, the Corporation had commercial construction loans of $189,233 and $210,098, respectively, representing 2.4% and 3.1% of total loans, respectively.

For each reporting period, total cash flows (both principal and interest) expected to be collected over the remaining life of the loan incorporate assumptions regarding default rates, loss severities, the amounts and timing of prepayments, the value of underlying collateral based on independent appraisals that the Corporation reviews for acceptability and considering the time and costs of foreclosure and disposition of the collateral and other factors that reflect then-current market conditions. The Corporation modifies, updates and refines assumptions as circumstances change. Contractual cash flows at each reporting period are determined utilizing the amortized cost method of loan accounting after recognition of contractual interest.

Purchased Credit-Impaired (PCI) Loans

The Corporation has acquired loans for which there was evidence of deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected.

Following are provisional amounts recognized for PCI loans identified in the Corporation’s acquisition of Parkvale:

 

     At
Acquisition
 

Contractually required principal and interest at acquisition

   $ 8,989   

Contractual cash flows not expected to be collected (non-accretable difference)

     2,835   
  

 

 

 

Expected cash flows at acquisition

     6,154   

Interest component of expected cash flows (accretable difference)

     589   
  

 

 

 

Fair value at acquisition

   $ 5,565   
  

 

 

 

Following is additional information about PCI loans identified in the Corporation’s acquisition of Parkvale:

 

     At
Acquisition
     March 31,
2012
 

Outstanding balance

   $ 8,989       $ 9,074   

Carrying amount

     5,565         5,492   

Allowance for loan losses

     n/a         —     

Impairment recognized since acquisition

     n/a         —     

Allowance reduction recognized since acquisition

     n/a         —     

 

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Table of Contents
     Contractual
Receivable
    Non-
Accretable
Difference
    Expected
Cash Flows
    Accretable
Yield
    Carrying
Amount
 

For the Three Months Ended March 31, 2012

          

Balance at beginning of period

   $ 51,693      $ (33,377   $ 18,316      $ (2,477   $ 15,839   

Acquisitions

     8,989        (2,835     6,154        (589     5,565   

Accretion

     —          —          —          205        205   

Payments received

     (2,402     —          (2,402     —          (2,402

Reclass from non-accretable difference

     —          117        117        (117     —     

Disposals/transfers

     —          —          —          —          —     

Contractual interest

     855        (855     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 59,135      $ (36,950   $ 22,185      $ (2,978   $ 19,207   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

For the Year Ended December 31, 2011

          

Balance at beginning of period

   $ 20,356      $ (15,589   $ 4,767      $ (791   $ 3,976   

Acquisitions

     38,890        (19,401     19,489        (2,025     17,464   

Accretion

     —          —          —          903        194   

Payments received

     (4,784     —          (4,784     —          (4,075

Reclass from non-accretable difference

     —          709        709        (709     —     

Disposals/transfers

     (6,128     4,263        (1,865     145        (1,720

Contractual interest

     3,359        (3,359     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 51,693      $ (33,377   $ 18,316      $ (2,477   $ 15,839   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accretion in the table above includes $117 in 2012 and $709 in 2011 that primarily represents payoffs received on certain loans in excess of expected cash flows.

Credit Quality

Management monitors the credit quality of the Corporation’s loan portfolio on an ongoing basis. Measurement of delinquency and past due status are based on the contractual terms of each loan.

Non-performing loans include non-accrual loans and non-performing troubled debt restructurings (TDRs). Past due loans are reviewed on a monthly basis to identify loans for non-accrual status. The Corporation places a loan on non-accrual status and discontinues interest accruals generally when principal or interest is due and has remained unpaid for 90 to 180 days depending on the loan type. When a loan is placed on non-accrual status, all unpaid interest recognized in the current year is reversed. Non-accrual loans may not be restored to accrual status until all delinquent principal and interest have been paid and the ultimate collectibility of the remaining principal and interest is reasonably assured. TDRs are loans in which the borrower has been granted a concession on the interest rate or the original repayment terms due to financial distress. Non-performing assets also include debt securities on which OTTI has been taken in the current or prior periods that have not been returned to accrual status.

Following is a summary of non-performing assets:

 

     March 31,
2012
     December 31,
2011
 

Non-accrual loans

   $ 98,418       $ 94,335   

Troubled debt restructurings

     11,416         11,893   
  

 

 

    

 

 

 

Total non-performing loans

     109,834         106,228   

Other real estate owned (OREO)

     36,958         34,719   
  

 

 

    

 

 

 

Total non-performing loans and OREO

     146,792         140,947   

Non-performing investments

     3,478         8,972   
  

 

 

    

 

 

 

Total non-performing assets

   $ 150,270       $ 149,919   
  

 

 

    

 

 

 

 

21


Table of Contents
     March 31,
2012
    December 31,
2011
 

Asset quality ratios:

    

Non-performing loans as a percent of total loans

     1.41     1.55

Non-performing loans + OREO as a percent of total loans + OREO

     1.87     2.05

Non-performing assets as a percent of total assets

     1.28     1.53

Following is an age analysis of the Corporation’s past due loans, by class:

 

     30-89 Days
Past Due
     >90 Days
Past Due and

Still Accruing
     Non-
Accrual
     Total
Past Due
     Current      Total
Loans
 

March 31, 2012

                 

Commercial real estate

   $ 13,613       $ 16,772       $ 39,575       $ 69,960       $ 2,451,611       $ 2,521,571   

Commercial real estate – FL

     —           —           39,021         39,021         96,526         135,547   

Commercial and industrial

     3,837         998         7,622         12,457         1,438,687         1,451,144   

Commercial leases

     1,999         —           1,176         3,175         114,875         118,050   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     19,449         17,770         87,394         124,613         4,101,699         4,226,312   

Direct installment

     7,662         2,691         3,100         13,453         1,069,511         1,082,964   

Residential mortgages

     16,465         25,589         2,818         44,872         1,142,576         1,187,448   

Indirect installment

     3,398         415         986         4,799         559,130         563,929   

Consumer lines of credit

     1,804         1,038         620         3,462         701,311         704,773   

Other

     39         12         3,500         3,551         33,815         37,366   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 48,817       $ 47,515       $ 98,418       $ 194,750       $ 7,608,042       $ 7,802,792   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2011

                 

Commercial real estate

   $ 13,868       $ 9,612       $ 37,134       $ 60,614       $ 2,281,032       $ 2,341,646   

Commercial real estate – FL

     —           —           39,122         39,122         114,959         154,081   

Commercial and industrial

     2,164         690         6,956         9,810         1,353,882         1,363,692   

Commercial leases

     1,102         5         1,084         2,191         108,604         110,795   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     17,134         10,307         84,296         111,737         3,858,477         3,970,214   

Direct installment

     8,228         3,614         2,525         14,367         1,014,820         1,029,187   

Residential mortgages

     14,492         3,342         2,443         20,277         650,659         670,936   

Indirect installment

     5,031         282         918         6,231         534,558         540,789   

Consumer lines of credit

     1,253         586         653         2,492         604,788         607,280   

Other

     36         —           3,500         3,536         34,725         38,261   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 46,174       $ 18,131       $ 94,335       $ 158,640       $ 6,698,027       $ 6,856,667   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The Corporation utilizes the following categories to monitor credit quality within its commercial loan portfolio:

 

Rating
Category
  

Definition

Pass    in general, the condition of the borrower and the performance of the loan is satisfactory or better
Special Mention    in general, the condition of the borrower has deteriorated although the loan performs as agreed
Substandard   

in general, the condition of the borrower has significantly deteriorated and the performance of

the loan could further deteriorate if deficiencies are not corrected

Doubtful   

in general, the condition of the borrower has significantly deteriorated and the collection in full

of both principal and interest is highly questionable or improbable

 

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Table of Contents

The use of these internally assigned credit quality categories within the commercial loan portfolio permits management’s use of migration and roll rate analysis to estimate a quantitative portion of credit risk. The Corporation’s internal credit risk grading system is based on past experiences with similarly graded loans and conforms with regulatory categories. In general, loan risk ratings within each category are reviewed on an ongoing basis according to the Corporation’s policy for each class of loans. Each quarter, management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the commercial loan portfolio. Loans that migrate toward the Pass credit category or within the Pass credit category generally have a lower risk of loss and; therefore, a lower risk factor compared to loans that migrate toward the Substandard or Doubtful credit categories, which generally have a higher risk of loss and; therefore, a higher risk factor applied to those related loan balances.

Following is a table showing commercial loans by credit quality category:

 

     Commercial Loan Credit Quality Categories  
      Pass      Special
Mention
     Substandard      Doubtful      Total  

March 31, 2012

              

Commercial real estate

   $ 2,278,693       $ 81,587       $ 152,581       $ 8,710       $ 2,521,571   

Commercial real estate – FL

     69,723         12,921         52,903         —           135,547   

Commercial and industrial

     1,353,573         52,008         43,948         1,615         1,451,144   

Commercial leases

     116,015         151         1,884         —           118,050   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 3,818,004       $ 146,667       $ 251,316       $ 10,325       $ 4,226,312   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2011

              

Commercial real estate

   $ 2,127,334       $ 73,701       $ 139,578       $ 1,033       $ 2,341,646   

Commercial real estate – FL

     70,802         16,002         67,277         —           154,081   

Commercial and industrial

     1,275,230         49,282         38,171         1,009         1,363,692   

Commercial leases

     105,631         3,362         1,802         —           110,795   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 3,578,997       $ 142,347       $ 246,828       $ 2,042       $ 3,970,214   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The Corporation uses payment status and delinquency migration analysis within the consumer and other loan classes to enable management to estimate a quantitative portion of credit risk. Each month, management analyzes payment and volume activity, as well as other external statistics and factors such as unemployment, to determine how consumer loans are performing.

Following is a table showing consumer and other loans by payment activity:

 

     Consumer Loan Credit Quality by Payment Status  
      Performing      Non-Performing      Total  

March 31, 2012

        

Direct installment

   $ 1,075,957       $ 7,007       $ 1,082,964   

Residential mortgages

     1,177,299         10,149         1,187,448   

Indirect installment

     562,881         1,048         563,929   

Consumer lines of credit

     704,038         735         704,773   

Other

     33,866         3,500         37,366   

December 31, 2011

        

Direct installment

   $ 1,022,025       $ 7,162       $ 1,029,187   

Residential mortgages

     661,392         9,544         670,936   

Indirect installment

     539,810         979         540,789   

Consumer lines of credit

     606,533         747         607,280   

Other

     34,761         3,500         38,261   

Loans are designated as impaired when, in the opinion of management, based on current information and events, the collection of principal and interest in accordance with the loan contract is doubtful. Typically, the Corporation does not consider loans for impairment unless a sustained period of delinquency (i.e., 90-plus days) is noted or there are subsequent events that impact repayment probability (i.e., negative financial trends, bankruptcy filings, imminent foreclosure proceedings, etc.). Impairment is evaluated in the aggregate for consumer installment loans, residential mortgages, consumer lines of credit, commercial leases and commercial loan relationships less than

 

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$500. For loan relationships greater than or equal to $500, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using a market interest rate or at the fair value of collateral if repayment is expected solely from the collateral. Consistent with the Corporation’s existing method of income recognition for loans, interest on impaired loans, except those classified as non-accrual, is recognized as income using the accrual method. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Following is a summary of information pertaining to loans considered to be impaired, by class of loans:

 

     Recorded
Investment
     Unpaid
Principal
Balance
     Specific
Related

Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

At or For the Three Months Ended March 31, 2012

              

With no specific allowance recorded:

              

Commercial real estate

   $ 33,672       $ 40,398       $ —         $ 30,915       $ 151   

Commercial real estate - FL

     14,255         24,588         —           21,490         33   

Commercial and industrial

     7,705         10,263         —           5,966         7   

Commercial leases

     1,176         1,176         —           1,130         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     56,808         76,425         —           59,501         191   

Direct installment

     7,007         7,190         —           7,085         31   

Residential mortgages

     10,138         10,493         —           9,841         80   

Indirect installment

     1,048         1,294         —           1,013         3   

Consumer lines of credit

     735         750         —           741         —     

Other

     3,500         3,500         —           3,500         —     

Purchased credit-impaired loans

     19,207         23,308         —           15,417         —     

With a specific allowance recorded:

              

Commercial real estate

     4,414         4,414         2,137         6,409         25   

Commercial real estate - FL

     24,766         39,740         3,389         17,583         —     

Commercial and industrial

     658         658         556         2,123         3   

Commercial leases

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     29,838         44,812         6,082         26,115         28   

Direct installment

     —           —           —           —           —     

Residential mortgages

     —           —           —           —           —     

Indirect installment

     —           —           —           —           —     

Consumer lines of credit

     —           —           —           —           —     

Other

     —           —           —           —           —     

Purchased credit-impaired loans

     —           —           —           —           —     

Total:

              

Commercial real estate

     38,086         44,812         2,137         37,324         176   

Commercial real estate - FL

     39,021         64,328         3,389         39,073         33   

Commercial and industrial

     8,363         10,921         556         8,089         10   

Commercial leases

     1,176         1,176         —           1,130         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     86,646         121,237         6,082         85,616         219   

Direct installment

     7,007         7,190         —           7,085         31   

Residential mortgages

     10,138         10,493         —           9,841         80   

Indirect installment

     1,048         1,294         —           1,013         3   

Consumer lines of credit

     735         750         —           741         —     

Other

     3,500         3,500         —           3,500         —     

Purchased credit-impaired loans

     19,207         23,308         —           15,417         —     

 

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     Recorded
Investment
     Unpaid
Principal
Balance
     Specific
Related

Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

At or For the Year Ended December 31, 2011

              

With no specific allowance recorded:

              

Commercial real estate

   $ 28,163       $ 32,476       $ —         $ 31,432       $ 151   

Commercial real estate - FL

     28,721         46,162         —           29,630         33   

Commercial and industrial

     4,228         4,971         —           4,610         17   

Commercial leases

     1,084         1,084         —           1,217         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     62,196         84,693         —           66,889         201   

Direct installment

     7,162         7,522         —           7,530         207   

Residential mortgages

     9,544         9,839         —           10,278         175   

Indirect installment

     979         1,071         —           973         24   

Consumer lines of credit

     747         761         —           947         8   

Other

     3,500         3,500         —           1,750         —     

Purchased credit-impaired loans

     15,839         18,743         —           15,326         —     

With a specific allowance recorded:

              

Commercial real estate

     8,403         8,423         2,482         8,875         32   

Commercial real estate - FL

     10,401         18,195         2,389         16,559         21   

Commercial and industrial

     3,588         3,750         2,276         3,603         20   

Commercial leases

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     22,392         30,368         7,147         29,037         73   

Direct installment

     —           —           —           —           —     

Residential mortgages

     —           —           —           —           —     

Indirect installment

     —           —           —           —           —     

Consumer lines of credit

     —           —           —           —           —     

Other

     —           —           —           —           —     

Purchased credit-impaired loans

     —           —           —           —           —     

Total:

              

Commercial real estate

     36,566         40,899         2,482         40,307         183   

Commercial real estate - FL

     39,122         64,357         2,389         46,189         54   

Commercial and industrial

     7,816         8,721         2,276         8,213         37   

Commercial leases

     1,084         1,084         —           1,217         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     84,588         115,061         7,147         95,926         274   

Direct installment

     7,162         7,522         —           7,530         207   

Residential mortgages

     9,544         9,839