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 June 30, 2013

 

¨ 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 July 31, 2013

Common Stock, $0.01 Par Value   145,165,793 Shares


Table of Contents

F.N.B. CORPORATION

FORM 10-Q

June 30, 2013

INDEX

 

     PAGE  

PART I – FINANCIAL INFORMATION

  
Item 1.   Financial Statements   
  Consolidated Balance Sheets      3   
  Consolidated Statements of Comprehensive Income      4   
  Consolidated Statements of Stockholders’ Equity      5   
  Consolidated Statements of Cash Flows      6   
  Notes to Consolidated Financial Statements      7   
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations      55   
Item 3.   Quantitative and Qualitative Disclosures About Market Risk      76   
Item 4.   Controls and Procedures      76   

PART II – OTHER INFORMATION

  
Item 1.   Legal Proceedings      77   
Item 1A.   Risk Factors      79   
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds      79   
Item 3.   Defaults Upon Senior Securities      79   
Item 4.   Mine Safety Disclosures      79   
Item 5.   Other Information      79   
Item 6.   Exhibits      79   

Signatures

     80   

 

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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

 

     June 30,
2013
    December 31,
2012
 
     (Unaudited)        

Assets

    

Cash and due from banks

   $ 197,879      $ 216,233   

Interest bearing deposits with banks

     32,223        22,811   
  

 

 

   

 

 

 

Cash and Cash Equivalents

     230,102        239,044   

Securities available for sale

     1,164,903        1,172,683   

Securities held to maturity (fair value of $1,153,077 and $1,143,213)

     1,149,481        1,106,563   

Residential mortgage loans held for sale

     19,614        27,751   

Loans, net of unearned income of $49,964 and $51,661

     8,637,089        8,137,719   

Allowance for loan losses

     (108,280     (104,374
  

 

 

   

 

 

 

Net Loans

     8,528,809        8,033,345   

Premises and equipment, net

     145,833        140,367   

Goodwill

     709,477        675,555   

Core deposit and other intangible assets, net

     37,503        37,851   

Bank owned life insurance

     262,877        246,088   

Other assets

     324,792        344,729   
  

 

 

   

 

 

 

Total Assets

   $ 12,573,391      $ 12,023,976   
  

 

 

   

 

 

 

Liabilities

    

Deposits:

    

Non-interest bearing demand

   $ 1,974,415      $ 1,738,195   

Savings and NOW

     5,243,746        4,808,121   

Certificates and other time deposits

     2,428,037        2,535,858   
  

 

 

   

 

 

 

Total Deposits

     9,646,198        9,082,174   

Other liabilities

     140,958        163,151   

Short-term borrowings

     1,030,617        1,083,138   

Long-term debt

     92,420        89,425   

Junior subordinated debt

     194,200        204,019   
  

 

 

   

 

 

 

Total Liabilities

     11,104,393        10,621,907   

Stockholders’ Equity

    

Common stock - $0.01 par value

    

Authorized – 500,000,000 shares

    

Issued – 145,792,416 and 140,314,846 shares

     1,454        1,398   

Additional paid-in capital

     1,438,008        1,376,601   

Retained earnings

     98,575        75,312   

Accumulated other comprehensive loss

     (62,077     (46,224

Treasury stock – 641,137 and 385,604 shares at cost

     (6,962     (5,018
  

 

 

   

 

 

 

Total Stockholders’ Equity

     1,468,998        1,402,069   
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 12,573,391      $ 12,023,976   
  

 

 

   

 

 

 

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
June 30,
     Six Months Ended
June 30,
 
     2013      2012      2013      2012  

Interest Income

           

Loans, including fees

   $ 95,682       $ 95,037       $ 188,657       $ 188,175   

Securities:

           

Taxable

     10,656         12,515         21,253         24,552   

Nontaxable

     1,443         1,680         2,959         3,401   

Dividends

     42         14         58         349   

Other

     18         39         32         95   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Interest Income

     107,841         109,285         212,959         216,572   

Interest Expense

           

Deposits

     7,343         10,613         15,608         22,571   

Short-term borrowings

     1,075         1,335         2,182         2,779   

Long-term debt

     775         889         1,549         1,842   

Junior subordinated debt

     1,902         1,967         3,778         3,978   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Interest Expense

     11,095         14,804         23,117         31,170   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Interest Income

     96,746         94,481         189,842         185,402   

Provision for loan losses

     7,903         7,027         15,444         13,599   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Interest Income After Provision for Loan Losses

     88,843         87,454         174,398         171,803   

Non-Interest Income

           

Service charges

     18,660         17,588         35,191         34,753   

Insurance commissions and fees

     4,101         3,882         8,531         8,054   

Securities commissions and fees

     2,867         2,030         5,790         4,041   

Trust fees

     4,167         3,842         8,252         7,576   

Net securities gains

     68         260         752         368   

Gain on sale of residential mortgage loans

     1,022         711         2,043         1,520   

Bank owned life insurance

     1,890         1,579         3,526         3,138   

Other

     3,976         2,886         6,339         5,073   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Non-Interest Income

     36,751         32,778         70,424         64,523   

Non-Interest Expense

           

Salaries and employee benefits

     43,201         41,070         87,106         85,676   

Net occupancy

     6,839         6,178         13,537         12,784   

Equipment

     6,106         5,684         11,598         10,870   

Amortization of intangibles

     2,125         2,369         4,111         4,650   

Outside services

     8,562         7,310         15,767         13,677   

FDIC insurance

     2,672         2,187         5,036         4,158   

Merger related

     2,946         317         3,298         7,311   

Other

     11,730         13,367         22,591         26,029   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Non-Interest Expense

     84,181         78,482         163,044         165,155   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income Before Income Taxes

     41,413         41,750         81,778         71,171   

Income taxes

     12,220         12,620         24,047         20,459   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

   $ 29,193       $ 29,130       $ 57,731       $ 50,712   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income per Share – Basic

   $ 0.20       $ 0.21       $ 0.41       $ 0.36   

Net Income per Share – Diluted

     0.20         0.21         0.40         0.36   

Cash Dividends per Share

     0.12         0.12         0.24         0.24   

Comprehensive Income

   $ 14,314       $ 31,504       $ 41,878       $ 54,499   
  

 

 

    

 

 

    

 

 

    

 

 

 

See accompanying Notes to Consolidated Financial Statements

 

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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, 2013

   $ 1,398       $ 1,376,601       $ 75,312      $ (46,224   $ (5,018   $ 1,402,069   

Net income

           57,731            57,731   

Change in other comprehensive income, net of tax

             (15,853       (15,853

Common stock dividends ($0.24/share)

           (34,468         (34,468

Issuance of common stock

     56         58,066             (1,944     56,178   

Restricted stock compensation

        2,094               2,094   

Tax expense of stock-based compensation

        1,247               1,247   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 1,454       $ 1,438,008       $ 98,575      $ (62,077   $ (6,962   $ 1,468,998   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at January 1, 2012

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

Net income

           50,712            50,712   

Change in other comprehensive income, net of tax

             3,787          3,787   

Common stock dividends ($0.24/share)

           (33,775         (33,775

Issuance of common stock

     128         140,704         (377       (1,461     138,994   

Restricted stock compensation

        2,206               2,206   

Tax expense of stock-based compensation

        373               373   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

   $ 1,396       $ 1,367,855       $ 49,485      $ (41,361   $ (4,879   $ 1,372,496   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

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

 

     Six Months Ended
June 30,
 
     2013     2012  

Operating Activities

    

Net income

   $ 57,731      $ 50,712   

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

    

Depreciation, amortization and accretion

     15,446        13,670   

Provision for loan losses

     15,444        13,599   

Deferred tax expenses

     3,936        9,149   

Net securities gains

     (752     (368

Tax benefit of stock-based compensation

     (1,247     (373

Net change in:

    

Interest receivable

     (1,207     348   

Interest payable

     (2,160     (3,153

Trading securities

     88,052        331,972   

Residential mortgage loans held for sale

     8,137        (2,726

Bank owned life insurance

     (899     (2,733

Other, net

     18,370        15,901   
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     200,851        425,998   
  

 

 

   

 

 

 

Investing Activities

    

Net change in loans

     (262,589     (107,351

Securities available for sale:

    

Purchases

     (211,531     (610,783

Sales

     21,919        63,082   

Maturities

     188,782        259,981   

Securities held to maturity:

    

Purchases

     (235,392     (427,756

Sales

     17,429        2,903   

Maturities

     172,586        150,069   

Purchase of bank owned life insurance

     (10,022     (20,023

Withdrawal/surrender of bank owned life insurance

     —          20,701   

Increase in premises and equipment

     (1,853     (8,104

Net cash received in business combinations

     41,986        203,538   
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (278,685     (473,743
  

 

 

   

 

 

 

Financing Activities

    

Net change in:

    

Non-interest bearing deposits, savings and NOW accounts

     390,867        368,857   

Time deposits

     (173,154     (192,535

Short-term borrowings

     (66,920     70,276   

Increase in long-term debt

     20,826        13,591   

Decrease in long-term debt

     (56,479     (169,618

Decrease in junior subordinated debt

     (15,000     —     

Net proceeds from issuance of common stock

     1,973        4,381   

Tax benefit of stock-based compensation

     1,247        373   

Cash dividends paid

     (34,468     (33,775
  

 

 

   

 

 

 

Net cash flows provided by financing activities

     68,892        61,550   
  

 

 

   

 

 

 

Net (Decrease) Increase in Cash and Cash Equivalents

     (8,942     13,805   

Cash and cash equivalents at beginning of period

     239,044        208,953   
  

 

 

   

 

 

 

Cash and Cash Equivalents at End of Period

   $ 230,102      $ 222,758   
  

 

 

   

 

 

 

See accompanying Notes to Consolidated Financial Statements

 

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Table of Contents

F.N.B. CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except share data

(Unaudited)

June 30, 2013

BUSINESS

F.N.B. Corporation (the Corporation), headquartered in Hermitage, Pennsylvania, is a regional diversified financial services company operating in six states and three major metropolitan areas, including Pittsburgh, Pennsylvania, Baltimore, Maryland and Cleveland, Ohio. The Corporation has more than 250 banking offices throughout Pennsylvania, Ohio, West Virginia and Maryland. The Corporation provides a full range of commercial banking, consumer banking and wealth management solutions through its subsidiary network which is led by its largest affiliate, First National Bank of Pennsylvania (FNBPA). Commercial banking solutions include corporate banking, small business banking, investment real estate financing, asset based lending, capital markets and lease financing. Consumer banking products and services include deposit products, mortgage lending, consumer lending and a complete suite of mobile and online banking services. Wealth management services include asset management, private banking and insurance. The Corporation also operates Regency Finance Company (Regency), which has more than 70 consumer finance offices in Pennsylvania, Ohio, Kentucky and Tennessee.

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 FNBPA, First National Trust Company, First National Investment Services Company, LLC, F.N.B. Investment Advisors, Inc., First National Insurance Agency, LLC, 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, 2013.

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.

MERGERS AND ACQUISITIONS

On April 6, 2013, the Corporation completed its acquisition of Annapolis Bancorp, Inc. (ANNB), a bank holding company based in Annapolis, Maryland. On the acquisition date, ANNB had $434,729 in assets, which included $273,269 in loans, and $348,343 in deposits. The acquisition, net of equity offering costs, was valued at $56,300 and resulted in the Corporation issuing 4,641,412 shares of its common stock in exchange for 4,060,802 shares of ANNB common stock. Additionally, the Corporation paid $609, or $0.15 per share, to the holders of ANNB common stock as cash consideration due to the collection of a certain loan, as designated in the merger agreement. The assets and liabilities

 

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of ANNB were recorded on the Corporation’s balance sheet at their preliminary estimated fair values as of April 6, 2013, the acquisition date, and ANNB’s results of operations have been included in the Corporation’s consolidated statements of income and comprehensive income since that date. ANNB’s banking affiliate, BankAnnapolis, was merged into FNBPA on April 6, 2013. In conjunction with the acquisition, a warrant issued by ANNB to the U.S. Department of the Treasury (UST) under the Capital Purchase Program (CPP) was assumed by the Corporation and converted into a warrant to purchase up to 342,564 shares of the Corporation’s common stock. The warrant expires January 30, 2019 and has an exercise price of $3.57 per share. Based on a preliminary purchase price allocation, the Corporation has recorded $33,922 in goodwill and $3,762 in core deposit intangibles as a result of the acquisition. The Corporation has recorded estimates of the fair values of acquired assets and liabilities. These fair value estimates are provisional amounts based on third party valuations that are currently under review. None of the goodwill is deductible for income tax purposes.

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 $140,900 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 fair values as of January 1, 2012, the acquisition date, and Parkvale’s results of operations have been included in the Corporation’s consolidated statements of income and comprehensive income since that date. Parkvale’s banking affiliate, Parkvale Bank, was merged into FNBPA on January 1, 2012. The warrant issued by Parkvale to the UST under the CPP was assumed by the Corporation and 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 the purchase price allocation, which was completed in the fourth quarter of 2012, the Corporation recorded $106,602 in goodwill and $16,033 in core deposit intangibles as a result of the acquisition. None of the goodwill is deductible for income tax purposes.

Pending Acquisitions

On June 14, 2013, the Corporation announced the signing of a definitive merger agreement to acquire BCSB Bancorp, Inc. (BCSB), a bank holding company with approximately $640,000 in total assets based in Baltimore, Maryland. The transaction is valued at approximately $79,000. Under the terms of the merger agreement, BCSB shareholders will be entitled to receive 2.08 shares of the Corporation’s common stock for each share of BCSB common stock. BCSB’s banking affiliate, Baltimore County Savings Bank, will be merged into FNBPA. The transaction is expected to be completed in the first quarter of 2014, pending regulatory approvals, the approval of shareholders of BCSB and the satisfaction of other closing conditions.

On February 19, 2013, the Corporation announced the signing of a definitive merger agreement to acquire PVF Capital Corp. (PVF), a savings and loan holding company with approximately $782,000 in total assets based in Solon, Ohio. The transaction is valued at approximately $106,300. Under the terms of the merger agreement, PVF shareholders will be entitled to receive 0.3405 shares of the Corporation’s common stock for each share of PVF common stock. PVF’s banking affiliate, Park View Federal Savings Bank, will be merged into FNBPA. The Corporation has received regulatory approvals. The transaction is expected to be completed in the fourth quarter of 2013, pending the approval of shareholders of PVF and the satisfaction of other closing conditions.

NEW ACCOUNTING STANDARDS

Comprehensive Income

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, that requires an entity to report the effects of significant reclassifications out of each component of accumulated other comprehensive income on the respective line item in net income if the amount being reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For amounts not required to be reclassified in their entirety in the same reporting period, an entity shall add a cross reference to the related footnote where additional information about the effect of the reclassification is disclosed. The requirements of ASU 2013-02 are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of this update did not have a material effect on the financial statements, results of operations or liquidity of the Corporation.

 

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Disclosures about Offsetting Assets and Liabilities

In January 2013, the FASB issued ASU No. 2013-01, Scope Clarification of Disclosures about Offsetting Assets and Liabilities, that clarifies the scope of its previously issued guidance, limiting the disclosure requirements to derivative instruments, repurchase agreements and reverse repurchase agreements and securities borrowing and lending transactions to the extent that they are offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement. The requirements of ASU 2013-01 are effective on January 1, 2013. The adoption of this update 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:

 

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair Value  

Securities Available for Sale:

          

June 30, 2013

          

U.S. government-sponsored entities

   $ 361,157       $ 354       $ (5,291   $ 356,220   

Residential mortgage-backed securities:

          

Agency mortgage-backed securities

     213,222         4,593         (517     217,298   

Agency collateralized mortgage obligations

     532,962         1,602         (9,357     525,207   

Non-agency collateralized mortgage obligations

     2,075         22         —          2,097   

States of the U.S. and political subdivisions

     18,315         646         (144     18,817   

Collateralized debt obligations

     35,775         2,260         (10,958     27,077   

Other debt securities

     16,452         529         (913     16,068   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

     1,179,958         10,006         (27,180     1,162,784   

Equity securities

     1,554         584         (19     2,119   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 1,181,512       $ 10,590       $ (27,199   $ 1,164,903   
  

 

 

    

 

 

    

 

 

   

 

 

 

December 31, 2012

          

U.S. government-sponsored entities

   $ 352,910       $ 1,676       $ (129   $ 354,457   

Residential mortgage-backed securities:

          

Agency mortgage-backed securities

     267,575         7,575         —          275,150   

Agency collateralized mortgage obligations

     465,574         4,201         (228     469,547   

Non-agency collateralized mortgage obligations

     2,679         50         —          2,729   

States of the U.S. and political subdivisions

     23,592         1,232         —          24,824   

Collateralized debt obligations

     34,765         967         (13,276     22,456   

Other debt securities

     21,790         695         (972     21,513   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

     1,168,885         16,396         (14,605     1,170,676   

Equity securities

     1,554         462         (9     2,007   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 1,170,439       $ 16,858       $ (14,614   $ 1,172,683   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

9


Table of Contents
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair Value  

Securities Held to Maturity:

          

June 30, 2013

          

U.S. Treasury

   $ 503       $ 133       $ —        $ 636   

U.S. government-sponsored entities

     43,525         273         (1,192     42,606   

Residential mortgage-backed securities:

          

Agency mortgage-backed securities

     646,060         13,317         (3,641     655,736   

Agency collateralized mortgage obligations

     308,893         322         (7,238     301,977   

Non-agency collateralized mortgage obligations

     8,012         74         (3     8,083   

Commercial mortgage-backed securities

     2,253         146         (25     2,374   

States of the U.S. and political subdivisions

     140,235         3,082         (1,652     141,665   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 1,149,481       $ 17,347       $ (13,751   $ 1,153,077   
  

 

 

    

 

 

    

 

 

   

 

 

 

December 31, 2012

          

U.S. Treasury

   $ 503       $ 188       $ —        $ 691   

U.S. government-sponsored entities

     28,731         280         (99     28,912   

Residential mortgage-backed securities:

          

Agency mortgage-backed securities

     780,022         28,783         (1     808,804   

Agency collateralized mortgage obligations

     133,976         1,266         —          135,242   

Non-agency collateralized mortgage obligations

     14,082         130         —          14,212   

Commercial mortgage-backed securities

     1,024         39         —          1,063   

States of the U.S. and political subdivisions

     147,713         6,099         —          153,812   

Collateralized debt obligations

     512         —           (35     477   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 1,106,563       $ 36,785       $ (135   $ 1,143,213   
  

 

 

    

 

 

    

 

 

   

 

 

 

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 statements of comprehensive income. The Corporation classified certain securities acquired in conjunction with the ANNB and Parkvale acquisitions as trading securities. The Corporation both acquired and sold these trading securities during the quarters in which the acquisitions occurred. As of June 30, 2013 and December 31, 2012, the Corporation did not hold any trading securities.

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

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2013     2012     2013     2012  

Gross gains

   $ 83      $ 447      $ 1,115      $ 796   

Gross losses

     (15     (187     (363     (428
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 68      $ 260      $ 752      $ 368   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

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Table of Contents

As of June 30, 2013, 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

   $ —         $ —         $ 2,462       $ 2,502   

Due from one to five years

     229,449         229,414         18,159         18,260   

Due from five to ten years

     154,725         150,731         84,930         84,944   

Due after ten years

     47,525         38,037         78,712         79,201   
  

 

 

    

 

 

    

 

 

    

 

 

 
     431,699         418,182         184,263         184,907   

Residential mortgage-backed securities:

           

Agency mortgage-backed securities

     213,222         217,298         646,060         655,736   

Agency collateralized mortgage obligations

     532,962         525,207         308,893         301,977   

Non-agency collateralized mortgage obligations

     2,075         2,097         8,012         8,083   

Commercial mortgage-backed securities

     —           —           2,253         2,374   

Equity securities

     1,554         2,119         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,181,512       $ 1,164,903       $ 1,149,481       $ 1,153,077   
  

 

 

    

 

 

    

 

 

    

 

 

 

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 June 30, 2013 and December 31, 2012, securities with a carrying value of $917,619 and $725,450, respectively, were pledged to secure public deposits, trust deposits and for other purposes as required by law. Securities with a carrying value of $737,968 and $795,812 at June 30, 2013 and December 31, 2012, 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:

 

     Less than 12 Months     12 Months or More     Total  
     #      Fair
Value
     Unrealized
Losses
    #      Fair
Value
     Unrealized
Losses
    #      Fair
Value
     Unrealized
Losses
 

Securities Available for Sale:

                        

June 30, 2013

                        

U.S. government-sponsored entities

     14       $ 207,922       $ (5,291     —         $ —         $ —          14       $ 207,922       $ (5,291

Residential mortgage-backed securities:

                        

Agency mortgage-backed securities

     4         73,957         (517     —           —           —          4         73,957         (517

Agency collateralized mortgage obligations

     20         355,673         (9,357     —           —           —          20         355,673         (9,357

States of the U.S. and political subdivisions

     2         3,128         (144     —           —           —          2         3,128         (144

Collateralized debt obligations

     —           —           —          12         9,984         (10,958     12         9,984         (10,958

Other debt securities

     —           —           —          4         5,962         (913     4         5,962         (913

Equity securities

     —           —           —          1         645         (19     1         645         (19
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 
     40       $ 640,680       $ (15,309     17       $ 16,591       $ (11,890     57       $ 657,271       $ (27,199
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

December 31, 2012

                        

U.S. government-sponsored entities

     3       $ 44,868       $ (129     —         $ —         $ —          3       $ 44,868       $ (129

Residential mortgage-backed securities:

                        

Agency collateralized mortgage obligations

     3         47,174         (228     —           —           —          3         47,174         (228

Collateralized debt obligations

     7         8,708         (909     9         5,532         (12,367     16         14,240         (13,276

Other debt securities

     —           —           —          4         5,899         (972     4         5,899         (972

Equity securities

     1         654         (9     —           —           —          1         654         (9
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 
     14       $ 101,404       $ (1,275     13       $ 11,431       $ (13,339     27       $ 112,835       $ (14,614
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

11


Table of Contents
     Less than 12 Months     12 Months or More     Total  
     #      Fair
Value
     Unrealized
Losses
    #      Fair
Value
     Unrealized
Losses
    #      Fair
Value
     Unrealized
Losses
 

Securities Held to Maturity:

                        

June 30, 2013

                        

U.S. government-sponsored entities

     3       $ 38,857       $ (1,192     —           —           —          3       $ 38,857       $ (1,192

Residential mortgage-backed securities:

                        

Agency mortgage-backed securities

     23         306,082         (3,641     —           —           —          23         306,082         (3,641

Agency collateralized mortgage obligations

     17         260,532         (7,238     —           —           —          17         260,532         (7,238

Non-agency collateralized mortgage obligations

     1         2,004         (3     —           —           —          1         2,004         (3

Commercial mortgage-backed securities

     1         997         (25     —           —           —          1         997         (25

States of the U.S. and political Subdivisions

     26         29,347         (1,652     —           —           —          26         29,347         (1,652
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 
     71       $ 637,819       $ (13,751     —           —           —          71       $ 637,819       $ (13,751
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

December 31, 2012

                        

U.S. government-sponsored entities

     1       $ 14,901       $ (99     —         $ —         $ —          1       $ 14,901       $ (99

Residential mortgage-backed securities:

                        

Agency mortgage-backed securities

     1         1,424         (1     —           —           —          1         1,424         (1

Collateralized debt obligations

     —           —           —          1         477         (35     1         477         (35
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 
     2       $ 16,325       $ (100     1       $ 477       $ (35     3       $ 16,802       $ (135
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

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 collateralized debt obligations (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 and are included in other debt securities. 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 two investments in senior tranches, 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.

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 comprehensive 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.

 

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Table of Contents

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) that 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.

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.

 

 

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Table of Contents

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 TPS consists of 23 pooled issues, primarily obtained through acquisitions, and four single-issuer securities. Two of the pooled issues are senior tranches; the remaining 21 are mezzanine tranches. At June 30, 2013, the pooled TPS had an estimated fair value of $27,077 while the single-issuer TPS had an estimated fair value of $5,962. The Corporation has concluded from the analysis performed at June 30, 2013 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.

At June 30, 2013, all four single-issuer TPS are current in regards to their principal and interest payments. Of the 23 pooled TPS, three are accruing interest based on the coupon rate, 18 are accreting income based on future expected cash flows and the remaining two are on non-accrual status. Income of $1,629 and $1,544 was recognized on pooled TPS for the six months ended June 30, 2013 and 2012, respectively. Included in the amount for the six months ended June 30, 2012 was $34 recognized on two pooled TPS which were sold in the second quarter of 2012.

The Corporation did not recognize any impairment losses on securities for the six months ended June 30, 2013 and 2012.

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:

 

     Collateralized
Debt
Obligations
    Residential
Non-Agency
CMOs
    Total  

For the Six Months Ended June 30, 2013

      

Beginning balance

   $ 17,155      $ 212      $ 17,367   

Loss where impairment was not previously recognized

     —          —          —     

Additional loss where impairment was previously recognized

     —          —          —     

Reduction due to credit impaired securities sold

     —          (212     (212
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 17,155      $ —        $ 17,155   
  

 

 

   

 

 

   

 

 

 

For the Six Months Ended June 30, 2012

      

Beginning balance

   $ 18,369      $ 29      $ 18,398   

Loss where impairment was not previously recognized

     —          —          —     

Additional loss where impairment was previously recognized

     —          —          —     

Reduction due to credit impaired securities sold

     (1,056     (29     (1,085
  

 

 

   

 

 

   

 

 

 

Ending balance

   $ 17,313      $ —        $ 17,313   
  

 

 

   

 

 

   

 

 

 

The secondary market for pooled TPS 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.

 

14


Table of Contents

The following table provides information relating to the Corporation’s TPS as of June 30, 2013:

 

Deal Name

  Class   Current
Par
Value
    Amortized
Cost
    Fair
Value
    Unrealized
Gain (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      $ 2,540      $ 1,311      $ (1,229   C     41        22        10        44        17        0.00   

P2

  C1     4,889        3,021        1,126        (1,895   C     41        16        15        40        15        0.00   

P3

  C1     5,561        4,307        1,469        (2,838   C     47        13        9        34        16        0.00   

P4

  C1     3,994        3,077        1,046        (2,031   C     52        16        6        42        16        0.00   

P5

  B3     2,000        752        349        (403   C     15        29        10        48        11        0.00   

P6

  B1     3,028        2,456        1,035        (1,421   C     50        14        19        34        10        0.18   

P7

  C     5,048        800        566        (234   C     35        14        26        40        13        0.00   

P8

  C     2,011        788        295        (493   C     44        16        11        35        17        0.52   

P9

  A4L     2,000        645        315        (330   C     24        16        14        41        11        0.00   
   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total OTTI

      34,031        18,386        7,512        (10,874       349        17        13        39        15     
   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

P10

  C1     5,220        1,053        1,244        191      C     41        22        10        44        17        0.00   

P11

  A2A     5,000        2,158        2,195        37      B+     41        16        15        40        15        47.85   

P12

  C1     4,781        1,269        1,263        (6   C     47        13        9        34        16        0.00   

P13

  C1     5,260        1,226        1,377        151      C     52        16        6        42        16        0.00   

P14

  C1     5,190        1,019        1,166        147      C     58        15        12        36        17        0.00   

P15

  C1     3,206        388        639        251      C     43        19        7        28        16        0.00   

P16

  C     3,339        625        673        48      C     36        15        12        28        15        0.00   

P17

  B     2,069        651        674        23      Ca     32        13        21        40        12        18.75   

P18

  B2     5,000        2,213        2,905        692      CCC     20        0        8        10        15        37.52   

P19

  B     4,061        951        1,337        386      C     44        16        11        35        17        0.52   

P20

  A1     3,331        1,989        2,053        64      BB-     46        21        6        35        15        54.24   

P21

  B     5,000        1,287        1,209        (78   C     15        18        6        49        11        0.00   

P22

  C1     5,531        1,335        1,399        64      C     23        15        12        42        11        0.00   

P23

  C1     5,606        1,225        1,431        206      C     23        16        10        44        11        0.00   
   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Not OTTI

      62,594        17,389        19,565        2,176          521        16        10        36        15     
   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Pooled TPS

    $ 96,625      $ 35,775      $ 27,077      $ (8,698       870        16        11        38        15     
   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

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Table of Contents

Deal Name

  Class   Current
Par
Value
    Amortized
Cost
    Fair
Value
    Unrealized
Gain (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      $ 1,954      $ 1,582      $ (372   BB     1             

S2

      2,000        1,922        1,610        (312   BBB     1             

S3

      2,000        2,000        1,976        (24   B+     1             

S4

      1,000        999        794        (205   BB     1             
   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

           

Total Single Issuer TPS

    $ 7,000      $ 6,875      $ 5,962      $ (913       4             
   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

           

Total TPS

    $ 103,625      $ 42,650      $ 33,039      $ (9,611       874             
   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

           

 

(1) Some current deferrals are expected to 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 $159,052 as of June 30, 2013 is highly rated with an average entity-specific rating of AA and 98.7% of the portfolio rated A or better. General obligation bonds comprise 99.0% of the portfolio. Geographically, municipal bonds support the Corporation’s footprint as 78.5% of the securities are from municipalities located throughout Pennsylvania. The average holding size of the securities in the municipal bond portfolio is $994. In addition to the strong stand-alone ratings, 69.0% of the municipalities have purchased credit enhancement insurance to strengthen the creditworthiness of their issue. Management also reviews the credit profile of each issuer on a quarterly basis.

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 June 30, 2013 and December 31, 2012, the Corporation’s FHLB stock totaled $19,786 and $24,560, respectively, and is included in other assets on the balance sheet. 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. Due to the continued improvement of the FHLB’s financial performance and stability over the past several years, 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:

 

     Originated
Loans
     Acquired
Loans
     Total
Loans
 

June 30, 2013

        

Commercial real estate

   $ 2,483,062       $ 383,474       $ 2,866,536   

Commercial and industrial

     1,663,065         87,805         1,750,870   

Commercial leases

     136,268         —           136,268   
  

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     4,282,395         471,279         4,753,674   

Direct installment

     1,236,888         65,003         1,301,891   

Residential mortgages

     662,208         397,436         1,059,644   

Indirect installment

     598,771         9,187         607,958   

Consumer lines of credit

     779,047         89,945         868,992   

Other

     44,930         —           44,930   
  

 

 

    

 

 

    

 

 

 
   $ 7,604,239       $ 1,032,850       $ 8,637,089   
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     Originated
Loans
     Acquired
Loans
     Total
Loans
 

December 31, 2012

        

Commercial real estate

   $ 2,448,471       $ 258,575       $ 2,707,046   

Commercial and industrial

     1,555,301         47,013         1,602,314   

Commercial leases

     130,133         —           130,133   
  

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     4,133,905         305,588         4,439,493   

Direct installment

     1,108,865         69,665         1,178,530   

Residential mortgages

     653,826         438,402         1,092,228   

Indirect installment

     568,324         13,713         582,037   

Consumer lines of credit

     732,534         72,960         805,494   

Other

     39,937         —           39,937   
  

 

 

    

 

 

    

 

 

 
   $ 7,237,391       $ 900,328       $ 8,137,719   
  

 

 

    

 

 

    

 

 

 

The carrying amount of acquired loans at June 30, 2013 totaled $1,032,850, including purchased credit-impaired (PCI) loans with a carrying amount of $17,181, while the carrying amount of acquired loans at December 31, 2012 totaled $900,328, including PCI loans with a carrying amount of $16,623. The outstanding contractual balance receivable of acquired loans at June 30, 2013 totaled $1,090,855, including PCI loans with an outstanding contractual balance receivable of $44,474, while the outstanding contractual balance receivable of acquired loans at December 31, 2012 totaled $949,862, including PCI loans with an outstanding contractual balance receivable of $41,134.

Commercial real estate includes both owner-occupied and non-owner-occupied loans secured by commercial properties. Commercial and industrial includes loans to businesses that are not secured by real estate. 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 originated by third parties and underwritten by the Corporation, 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, northeastern Ohio, northern West Virginia and central Maryland. The commercial real estate portfolio also includes loans in Florida, which totaled $49,795 or 0.6% of total loans at June 30, 2013, compared to $68,627 or 0.8% of total loans at December 31, 2012. Additionally, the total loan portfolio contains consumer finance loans to individuals in Pennsylvania, Ohio, Tennessee and Kentucky, which equaled $172,314 or 2.0% of total loans at June 30, 2013, compared to $170,999 or 2.1% of total loans at December 31, 2012. Due to the relative size of the consumer finance loan portfolio, they are not segregated from other consumer loans.

As of June 30, 2013, 47.1% of the commercial real estate loans were owner-occupied, while the remaining 52.9% were non-owner-occupied, compared to 46.5% and 53.5%, respectively, as of December 31, 2012. As of June 30, 2013 and December 31, 2012, the Corporation had commercial construction loans of $218,486 and $190,206, respectively, representing 2.5% and 2.3% of total loans, respectively.

ASC 310-30 Loans

All loans acquired in the ANNB and Parkvale acquisitions, except for revolving loans, are accounted for in accordance with ASC 310-30. Revolving loans are accounted for under ASC 310-20. The Corporation’s allowance for loan losses for acquired loans reflects only those losses incurred after acquisition.

 

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Table of Contents

The following table reflects amounts at acquisition for all purchased loans subject to ASC310-30 (impaired and non-impaired) acquired from ANNB in 2013 and Parkvale in 2012:

 

     Acquired
Impaired
Loans
    Acquired
Performing
Loans
    Total  

Acquired from ANNB in 2013

      

Contractually required cash flows at acquisition

   $ 12,200      $ 349,903      $ 362,103   

Non-accretable difference (expected losses and foregone interest)

     (7,829     (45,105     (52,934
  

 

 

   

 

 

   

 

 

 

Cash flows expected to be collected at acquisition

     4,371        304,798        309,169   

Accretable yield

     (523     (53,136     (53,659
  

 

 

   

 

 

   

 

 

 

Basis in acquired loans at acquisition

   $ 3,848      $ 251,662      $ 255,510   
  

 

 

   

 

 

   

 

 

 

Acquired from Parkvale in 2012

      

Contractually required cash flows at acquisition

   $ 12,224      $ 1,327,342      $ 1,339,566   

Non-accretable difference (expected losses and foregone interest)

     (6,070     (214,541     (220,611
  

 

 

   

 

 

   

 

 

 

Cash flows expected to be collected at acquisition

     6,154        1,112,801        1,118,955   

Accretable yield

     (589     (293,594     (294,183
  

 

 

   

 

 

   

 

 

 

Basis in acquired loans at acquisition

   $ 5,565      $ 819,207      $ 824,772   
  

 

 

   

 

 

   

 

 

 

The following table provides a summary of change in accretable yield for all acquired loans:

 

     Acquired
Impaired
Loans
    Acquired
Performing
Loans
    Total  

Six Months Ended June 30, 2013

      

Balance at beginning of period

   $ 778      $ 253,375      $ 254,153   

Acquisitions

     523        53,136        53,659   

Reduction due to unexpected early payoffs

     —          (20,908     (20,908

Reclass from non-accretable difference

     6,055        3,851        9,906   

Disposals/transfers

     (96     (146     (242

Accretion

     (1,628     (15,803     (17,431
  

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 5,632      $ 273,505      $ 279,137   
  

 

 

   

 

 

   

 

 

 

Year Ended December 31, 2012

      

Balance at beginning of period

   $ 2,477      $ 49,229      $ 51,706   

Acquisitions

     589        293,594        294,183   

Reduction due to unexpected early payoffs

     —          (57,840     (57,840

Reclass from non-accretable difference

     3,539        10,915        14,454   

Disposals/transfers

     (49     (615     (664

Accretion

     (5,778     (41,908     (47,686
  

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 778      $ 253,375      $ 254,153   
  

 

 

   

 

 

   

 

 

 

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 is information about PCI loans identified in the Corporation’s acquisition of ANNB:

 

     At
Acquisition
     June 30,
2013
 

Outstanding balance

   $ 12,785       $ 12,433   

Carrying amount

     3,848         3,377   

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

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

 

     At
Acquisition
     December 31,
2012
 

Outstanding balance

   $ 9,135       $ 3,704   

Carrying amount

     5,565         2,552   

Allowance for loan losses

     n/a         103   

Impairment recognized since acquisition

     n/a         103   

Allowance reduction recognized since acquisition

     n/a         —     

Following is information about the Corporation’s PCI loans:

 

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

For the Six Months Ended June 30, 2013

          

Balance at beginning of period

   $ 41,134      $ (23,733   $ 17,401      $ (778   $ 16,623   

Acquisitions

     12,785        (8,414     4,371        (523     3,848   

Accretion

     —          —          —          1,628        1,628   

Payments received

     (2,536     —          (2,536     —          (2,536

Reclass from non-accretable difference

     —          6,055        6,055        (6,055     —     

Disposals/transfers

     (8,332     5,854        (2,478     96        (2,382

Contractual interest

     1,423        (1,423     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 44,474      $ (21,661   $ 22,813      $ (5,632   $ 17,181   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

For the Year Ended December 31, 2012

          

Balance at beginning of period

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

Acquisitions

     9,135        (2,981     6,154        (589     5,565   

Accretion

     —          —          —          5,778        5,778   

Payments received

     (9,556     —          (9,556     —          (9,556

Reclass from non-accretable difference

     —          3,539        3,539        (3,539     —     

Disposals/transfers

     (12,494     11,442        (1,052     49        (1,003

Contractual interest

     2,356        (2,356     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 41,134      $ (23,733   $ 17,401      $ (778   $ 16,623   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accretion in the table above includes $6,055 in 2013 and $3,539 in 2012 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 on originated loans generally when principal or interest is due and has remained unpaid for a certain number of days unless the loan is both well secured and in the process of collection. Commercial loans are placed on non-accrual at 90 days, installment loans are placed on non-accrual at 120 days and residential mortgages and consumer lines of credit are generally placed on non-accrual at 180 days. When a loan is placed on non-accrual status, all unpaid interest is reversed. Non-accrual loans may not be restored to accrual status until all delinquent principal and interest have been paid and the ultimate ability to collect 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.

 

20


Table of Contents

Following is a summary of non-performing assets:

 

     June 30,
2013
    December 31,
2012
 

Non-accrual loans

   $ 67,034      $ 66,004   

Troubled debt restructurings

     17,488        14,876   
  

 

 

   

 

 

 

Total non-performing loans

     84,522        80,880   

Other real estate owned (OREO)

     37,370        35,257   
  

 

 

   

 

 

 

Total non-performing loans and OREO

     121,892        116,137   

Non-performing investments

     610        2,809   
  

 

 

   

 

 

 

Total non-performing assets

   $ 122,502      $ 118,946   
  

 

 

   

 

 

 

Asset quality ratios:

    

Non-performing loans as a percent of total loans

     0.98     0.99

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

     1.40     1.42

Non-performing assets as a percent of total assets

     0.97     0.99

The following tables provide an analysis of the aging of the Corporation’s past due loans by class, segregated by loans originated and loans acquired:

 

     30-89 Days
Past Due
     >90 Days
Past  Due and
Still Accruing
     Non-Accrual      Total
Past Due
     Current      Total
Loans
 

Originated loans:

                 

June 30, 2013

                 

Commercial real estate

   $ 5,786       $ 515       $ 47,953       $ 54,254       $ 2,428,808       $ 2,483,062   

Commercial and industrial

     3,669         465         8,343         12,477         1,650,588         1,663,065   

Commercial leases

     1,177         —           676         1,853         134,415         136,268   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     10,632         980         56,972         68,584         4,213,811         4,282,395   

Direct installment

     7,905         2,515         4,191         14,611         1,222,277         1,236,888   

Residential mortgages

     12,343         1,062         4,551         17,956         644,252         662,208   

Indirect installment

     4,421         289         1,167         5,877         592,894         598,771   

Consumer lines of credit

     2,136         521         153         2,810         776,237         779,047   

Other

     41         10         —           51         44,879         44,930   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 37,478       $ 5,377       $ 67,034       $ 109,889       $ 7,494,350       $ 7,604,239   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2012

                 

Commercial real estate

   $ 5,786       $ 533       $ 47,895       $ 54,214       $ 2,394,257       $ 2,448,471   

Commercial and industrial

     7,310         456         6,017         13,783         1,541,518         1,555,301   

Commercial leases

     1,671         —           965         2,636         127,497         130,133   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     14,767         989         54,877         70,633         4,063,272         4,133,905   

Direct installment

     8,834         2,717         3,342         14,893         1,093,972         1,108,865   

Residential mortgages

     15,821         2,365         2,891         21,077         632,749         653,826   

Indirect installment

     5,114         374         1,039         6,527         561,797         568,324   

Consumer lines of credit

     1,633         247         355         2,235         730,299         732,534   

Other

     36         15         3,500         3,551         36,386         39,937   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 46,205       $ 6,707       $ 66,004       $ 118,916       $ 7,118,475       $ 7,237,391   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     30-89
Days
Past Due
     > 90  Days
Past Due
and Still
Accruing
     Non-Accrual      Total
Past
Due (1)
     Current      Discount     Total
Loans
 

Acquired Loans:

                   

June 30, 2013

                   

Commercial real estate

   $ 10,056       $ 17,809         —         $ 27,865       $ 373,126       $ (17,517   $ 383,474   

Commercial and industrial

     3,122         5,264         —           8,386         81,402         (1,983     87,805   

Commercial leases

     —           —           —           —           —           —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total commercial loans and leases

     13,178         23,073         —           36,251         454,528         (19,500     471,279   

Direct installment

     1,839         910         —           2,749         59,419         2,835        65,003   

Residential mortgages

     8,962         21,122         —           30,084         403,058         (35,706     397,436   

Indirect installment

     264         48         —           312         9,604         (729     9,187   

Consumer lines of credit

     975         500         —           1,475         93,375         (4,905     89,945   

Other

     —           —           —           —           —           —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 25,218       $ 45,653         —         $ 70,871       $ 1,019,984       $ (58,005   $ 1,032,850   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

December 31, 2012

                   

Commercial real estate

   $ 6,829       $ 13,597         —         $ 20,426       $ 250,116       $ (11,967   $ 258,575   

Commercial and industrial

     1,653         138         —           1,791         47,351         (2,129     47,013   

Commercial leases

     —           —           —           —           —           —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total commercial loans and leases

     8,482         13,735         —           22,217         297,467         (14,096     305,588   

Direct installment

     1,454         947         —           2,401         63,502         3,762        69,665   

Residential mortgages

     12,137         21,069         —           33,206         439,620         (34,424     438,402   

Indirect installment

     347         56         —           403         14,089         (779     13,713   

Consumer lines of credit

     379         778         —           1,157         75,800         (3,997     72,960   

Other

     —           —           —           —           —           —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 22,799       $ 36,585         —         $ 59,384       $ 890,478       $ (49,534   $ 900,328   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) Past due information for loans acquired is based on the contractual balance outstanding at June 30, 2013 and December 31, 2012.

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, requiring an increased level of monitoring
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

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

 

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portfolio. Loans within the Pass credit category or that migrate toward the Pass credit category generally have a lower risk of loss compared to loans that migrate toward the Substandard or Doubtful credit categories. Accordingly, management applies higher risk factors to Substandard and Doubtful credit categories.

The following tables present a summary of the Corporation’s commercial loans by credit quality category, segregated by loans originated and loans acquired:

 

     Commercial Loan Credit Quality Categories  
     Pass      Special
Mention
     Substandard      Doubtful      Total  

Originated Loans:

              

June 30, 2013

              

Commercial real estate

   $ 2,322,000       $ 47,001       $ 111,250       $ 2,811       $ 2,483,062   

Commercial and industrial

     1,555,170         47,786         59,952         157         1,663,065   

Commercial leases

     135,059         320         889         —           136,268   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 4,012,229       $ 95,107       $ 172,091       $ 2,968       $ 4,282,395   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2012

              

Commercial real estate

   $ 2,282,139       $ 57,938       $ 106,258       $ 2,136       $ 2,448,471   

Commercial and industrial

     1,472,598         32,227         49,814         662         1,555,301   

Commercial leases

     126,283         243         3,607         —           130,133   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 3,881,020       $ 90,408       $ 159,679       $ 2,798       $ 4,133,905   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired Loans:

              

June 30, 2013

              

Commercial real estate

   $ 282,317       $ 46,703       $ 49,796       $ 4,658       $ 383,474   

Commercial and industrial

     65,698         6,717         14,689         701         87,805   

Commercial leases

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 348,015       $ 53,420       $ 64,485       $ 5,359       $ 471,279   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2012

              

Commercial real estate

   $ 204,300       $ 14,713       $ 39,093       $ 469       $ 258,575   

Commercial and industrial

     39,596         3,611         3,804         2         47,013   

Commercial leases

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 243,896       $ 18,324       $ 42,897       $ 471       $ 305,588   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Credit quality information for acquired loans is based on the contractual balance outstanding at June 30, 2013 and December 31, 2012. The increase in acquired loans in 2013 primarily relates to the ANNB acquisition on April 6, 2013.

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.

 

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Following is a table showing originated consumer loans by payment status:

 

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

June 30, 2013

        

Direct installment

   $ 1,226,619       $ 10,269       $ 1,236,888   

Residential mortgages

     647,797         14,411         662,208   

Indirect installment

     597,490         1,281         598,771   

Consumer lines of credit

     778,333         714         779,047   

Other

     44,930         —           44,930   

December 31, 2012

        

Direct installment

   $ 1,100,324       $ 8,541       $ 1,108,865   

Residential mortgages

     642,406         11,420         653,826   

Indirect installment

     567,192         1,132         568,324   

Consumer lines of credit

     731,788         746         732,534   

Other

     36,437         3,500         39,937   

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 $500. For commercial 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.

 

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Table of Contents

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

 

     Recorded
Investment
     Unpaid
Principal
Balance
     Specific
Related

Allowance
     Average
Recorded
Investment
 

At or For the Six Months Ended June 30, 2013

           

With no specific allowance recorded:

           

Commercial real estate

   $ 34,050       $ 46,816       $ —         $ 34,419   

Commercial and industrial

     9,588         12,103         —           10,249   

Commercial leases

     676         676         —           667   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     44,314         59,595         —           45,335   

Direct installment

     10,269         10,495         —           10,087   

Residential mortgages

     14,408         14,629         —           13,696   

Indirect installment

     1,281         2,604         —           1,184   

Consumer lines of credit

     714         763         —           761   

Other

     —           —           —           875   

With a specific allowance recorded:

           

Commercial real estate

     14,458         23,831         2,811         13,813   

Commercial and industrial

     127         131         127         421   

Commercial leases

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial loans and leases

     14,585         23,962         2,938         14,234   

Direct installment

     —           —           —           —     

Residential mortgages

     —           —           —           —     

Indirect installment

     —           —           —           —     

Consumer lines of credit

     —           —           —           —     

Other

     —