See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
Description of Business
TriCo
Bancshares is a California corporation organized to act as a bank holding company for Tri Counties Bank (the Bank). The Bank is a state-chartered financial institution that is engaged in the general commercial banking business in the
California counties of Butte, Contra Costa, Del Norte, Fresno, Glenn, Kern, Lake, Lassen, Madera, Mendocino, Merced, Napa, Nevada, Placer, Sacramento, Shasta, Siskiyou, Stanislaus, Sutter, Tehama, Tulare, Yolo and Yuba. Tri Counties Bank currently
operates from 41 traditional branches and 24 in-store branches. The Company also formed two subsidiary business trusts, TriCo Capital Trust I and TriCo Capital Trust II (collectively, the Trusts), to issue trust preferred securities.
Basis of Presentation
The following unaudited condensed
financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. In the opinion of
Management, all adjustments, consisting solely of normal recurring adjustments, considered necessary for a fair presentation of results for the interim periods presented have been included. These interim condensed consolidated financial statements
should be read in conjunction with the financial statements and related notes contained in the Companys 2012 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2013.
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned financial subsidiary, Tri Counties Bank. All
significant intercompany balances and transactions have been eliminated. TriCo Capital Trust I and TriCo Capital Trust II, which were formed solely for the purpose of issuing trust preferred securities, are unconsolidated subsidiaries as the Company
is not the primary beneficiary of the trusts and they are not considered variable interest entities. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2013. Certain amounts in the consolidated financial statements for the year ended December 31, 2012 and for the three and nine months ended September 30, 2012 may have been reclassified to conform to the
presentation of the condensed consolidated financial statements in 2013.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. On an on-going basis, the Company evaluates its estimates, including those related to the adequacy of the allowance for loan losses, investments, intangible assets, income taxes and contingencies. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The allowance for loan losses, indemnification asset, foreclosed assets, goodwill and other intangible assets, income taxes, fair
value of assets acquired and liabilities assumed in business combinations, the valuation of securities available-for-sale, and the valuation of mortgage servicing rights are the only accounting estimates that materially affect the Companys
consolidated financial statements.
As described in Note 2, the Bank assumed the banking operations of two failed financial institutions from the FDIC
under whole bank purchase agreements. The acquired assets and assumed liabilities were measured at estimated fair value values under the acquisition method of accounting. The Company made significant estimates and exercised significant judgment in
accounting for the acquisitions. The Company determined loan fair values based on loan file reviews, loan risk ratings, appraised collateral values, expected cash flows and historical loss factors. Foreclosed assets were primarily valued based on
appraised values of the repossessed loan collateral. An identifiable intangible was also recorded representing the fair value of the core deposit customer base based on an evaluation of the cost of such deposits relative to alternative funding
sources. The fair value of time deposits and borrowings were determined based on the present value of estimated future cash flows using current rates as of the acquisition date.
Significant Group Concentration of Credit Risk
The
Company grants agribusiness, commercial, consumer, and residential loans to customers located throughout the northern San Joaquin Valley, the Sacramento Valley and northern mountain regions of California. The Company has a diversified loan portfolio
within the business segments located in this geographical area. The Company currently classifies all its operation into one business segment that it denotes as community banking.
Cash and Cash Equivalents
For purposes of the
consolidated statements of cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Net cash flows are reported for loan and deposit transactions and other borrowings.
6
Investment Securities
The Company classifies its debt and marketable equity securities into one of three categories: trading, available for sale or held to maturity. Trading
securities are bought and held principally for the purpose of selling in the near term. Held to maturity securities are those securities which the Company has the ability and intent to hold until maturity. These securities are carried at cost
adjusted for amortization of premium and accretion of discount, computed by the effective interest method over their contractual lives. All other securities not included in trading or held to maturity are classified as available for sale. Available
for sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available for sale securities are reported as a separate component of other accumulated comprehensive income in shareholders equity
until realized. Premiums and discounts are amortized or accreted over the life of the related investment security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned. Realized gains
and losses are derived from the amortized cost of the security sold. During the nine months ended September 30, 2013, and the year ended December 31, 2012, the Company did not have any securities classified as trading. During the three
months ended March 31, 2013, and the year ended December 31, 2012, the Company did not have any securities classified as held to maturity.
The
Company assesses other-than-temporary impairment (OTTI) based on whether it intends to sell a security or if it is likely that the Company would be required to sell the security before recovery of the amortized cost basis of the
investment, which may be maturity. For debt securities, if we intend to sell the security or it is likely that we will be required to sell the security before recovering its cost basis, the entire impairment loss would be recognized in earnings as
an OTTI. If we do not intend to sell the security and it is not likely that we will be required to sell the security but we do not expect to recover the entire amortized cost basis of the security, only the portion of the impairment loss
representing credit losses would be recognized in earnings. The credit loss on a security is measured as the difference between the amortized cost basis and the present value of the cash flows expected to be collected. Projected cash flows are
discounted by the original or current effective interest rate depending on the nature of the security being measured for potential OTTI. The remaining impairment related to all other factors, the difference between the present value of the cash
flows expected to be collected and fair value, is recognized as a charge to other comprehensive income (OCI). Impairment losses related to all other factors are presented as separate categories within OCI. The accretion of the amount
recorded in OCI increases the carrying value of the investment and does not affect earnings. If there is an indication of additional credit losses the security is re-evaluated according to the procedures described above. No OTTI losses were
recognized during the nine months ended September 30, 2013, and the year ended December 31, 2012.
Restricted Equity Securities
Restricted equity securities represent the Companys investment in the stock of the Federal Home Loan Bank of San Francisco (FHLB) and are
carried at par value, which reasonably approximates its fair value. While technically these are considered equity securities, there is no market for the FHLB stock. Therefore, the shares are considered as restricted investment securities. Management
periodically evaluates FHLB stock for other-than-temporary impairment. Managements determination of whether these investments are impaired is based on its assessment of the ultimate recoverability of cost rather than by recognizing temporary
declines in value. The determination of whether a decline affects the ultimate recoverability of cost is influenced by criteria such as (1) the significance of any decline in net assets of the FHLB as compared to the capital stock amount for
the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, (3) the impact of
legislative and regulatory changes on institutions and, accordingly, the customer base of the FHLB, and (4) the liquidity position of the FHLB.
As a
member of the FHLB system, the Company is required to maintain a minimum level of investment in FHLB stock based on specific percentages of its outstanding mortgages, total assets, or FHLB advances. The Company may request redemption at par value of
any stock in excess of the minimum required investment. Stock redemptions are at the discretion of the FHLB.
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by aggregate outstanding
commitments from investors of current investor yield requirements. Net unrealized losses are recognized through a valuation allowance by charges to noninterest income.
Mortgage loans held for sale are generally sold with the mortgage servicing rights retained by the Company. Gains or losses on the sale of loans that are held
for sale are recognized at the time of the sale and determined by the difference between net sale proceeds and the net book value of the loans less the estimated fair value of any retained mortgage servicing rights.
Loans and Allowance for Loan Losses
Loans originated by
the Company, i.e., not purchased or acquired in a business combination, are referred to as originated loans. Originated loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at
the principal amount outstanding, net of deferred loan fees and costs. Loan origination and commitment fees and certain direct loan origination costs are deferred, and the net amount is amortized as an adjustment of the related loans yield
over the actual life of the loan. Originated loans on which the accrual of interest has been discontinued are designated as nonaccrual loans.
Originated
loans are placed in nonaccrual status when reasonable doubt exists as to the full, timely collection of interest or principal, or a loan becomes contractually past due by 90 days or more with respect to interest or principal and is not well secured
and in the process of collection. When an originated loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed. Income on such loans is then recognized only to the extent that cash is received and where the
future collection of principal is probable. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of Management, the loan is estimated to be fully
collectible as to both principal and interest.
7
An allowance for loan losses for originated loans is established through a provision for loan losses charged to
expense. The allowance is maintained at a level which, in Managements judgment, is adequate to absorb probable incurred credit losses inherent in the loan portfolio as of the balance sheet date. Originated loans and deposit related overdrafts
are charged against the allowance for loan losses when Management believes that the collectability of the principal is unlikely or, with respect to consumer installment loans, according to an established delinquency schedule. The allowance is an
amount that Management believes will be adequate to absorb probable losses inherent in existing loans and leases, based on evaluations of the collectability, impairment and prior loss experience of loans and leases. The evaluations take into
consideration such factors as changes in the nature and size of the portfolio, overall portfolio quality, loan concentrations, specific problem loans, and current economic conditions that may affect the borrowers ability to pay. The Company
defines an originated loan as impaired when it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired originated loans are measured based on the present value of expected
future cash flows discounted at the loans original effective interest rate. As a practical expedient, impairment may be measured based on the loans observable market price or the fair value of the collateral if the loan is collateral
dependent. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance.
In situations related to originated loans where, for economic or legal reasons related to a borrowers financial difficulties, the Company grants a
concession for other than an insignificant period of time to the borrower that the Company would not otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). The Company strives to identify borrowers in financial
difficulty early and work with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize
the economic loss and to avoid foreclosure or repossession of the collateral. In cases where the Company grants the borrower new terms that result in the loan being classified as a TDR, the Company measures any impairment on the restructuring as
noted above for impaired loans. TDR loans are classified as impaired until they are fully paid off or charged off. Loans that are in nonaccrual status at the time they become TDR loans, remain in nonaccrual status until the borrower demonstrates a
sustained period of performance which the Company generally believes to be six consecutive months of payments, or equivalent. Otherwise, TDR loans are subject to the same nonaccrual and charge-off policies as noted above with respect to their
restructured principal balance.
Credit risk is inherent in the business of lending. As a result, the Company maintains an allowance for loan losses to
absorb losses inherent in the Companys originated loan portfolio. This is maintained through periodic charges to earnings. These charges are included in the Consolidated Statements of Income as provision for loan losses. All specifically
identifiable and quantifiable losses are immediately charged off against the allowance. However, for a variety of reasons, not all losses are immediately known to the Company and, of those that are known, the full extent of the loss may not be
quantifiable at that point in time. The balance of the Companys allowance for originated loan losses is meant to be an estimate of these unknown but probable losses inherent in the portfolio.
The Company formally assesses the adequacy of the allowance for originated loan losses on a quarterly basis. Determination of the adequacy is based on ongoing
assessments of the probable risk in the outstanding originated loan portfolio, and to a lesser extent the Companys originated loan commitments. These assessments include the periodic re-grading of credits based on changes in their individual
credit characteristics including delinquency, seasoning, recent financial performance of the borrower, economic factors, changes in the interest rate environment, growth of the portfolio as a whole or by segment, and other factors as warranted.
Loans are initially graded when originated. They are re-graded as they are renewed, when there is a new loan to the same borrower, when identified facts demonstrate heightened risk of nonpayment, or if they become delinquent. Re-grading of larger
problem loans occurs at least quarterly. Confirmation of the quality of the grading process is obtained by independent credit reviews conducted by consultants specifically hired for this purpose and by various bank regulatory agencies.
The Companys method for assessing the appropriateness of the allowance for originated loan losses includes specific allowances for impaired originated
loans and leases, formula allowance factors for pools of credits, and allowances for changing environmental factors (e.g., interest rates, growth, economic conditions, etc.). Allowance factors for loan pools were based on historical loss experience
by product type and prior risk rating.
During the three months ended March 31, 2012, management changed some of the assumptions utilized in the
Allowance for Loan Losses estimate calculation. These changes were intended to more accurately reflect the current risk in the loan portfolio and to better estimate the losses inherent but not yet quantifiable. These changes included the conversion
to a historical loss migration analysis intended to better determine the appropriate formula reserve ratio by loan category and risk rating, the addition of an environmental factor related to the delinquency rate of loans not classified as impaired
by loan category, the elimination of an unspecified reserve allocation previously intended to account for imprecision inherent in the overall calculation, and the reclassification of risk rating of certain consumer loans based on current credit
score in an attempt to better identify the risk in the portfolio. The financial effect of these changes resulted in a net reduction in the calculated Allowance for Loan Losses of $1,388,000 during the three months ended March 31, 2012.
Allowances for impaired loans are based on analysis of individual credits. Allowances for changing environmental factors are Managements best estimate of the probable impact these changes have had on the originated loan portfolio as a whole.
The allowance for originated loans is included in the allowance for loan losses.
8
During the three months ended March 31, 2013, the Company changed the method it uses to estimate net sale
proceeds from real estate collateral sales when calculating the allowance for loan losses associated with impaired real estate collateral dependent loans. Previously, the Company used the greater of fifteen percent or actual estimated selling costs.
Currently, the Company uses the actual estimated selling costs, and an adjustment to appraised value based on the age of the appraisal. These changes are intended to more accurately reflect the estimated net sale proceeds from the sale of impaired
collateral dependent real estate loans. This change in methodology resulted in the allowance for loan losses as of March 31, 2013 being $494,000 more than it would have been without this change in methodology.
During the three months ended June 30, 2013, the Company modified its loss migration analysis methodology used to determine the formula allowance
factors. When the Company originally established its loss migration analysis methodology during the quarter ended March 31, 2012, it reviewed the loss experience of each quarter over the previous three years in order to calculate an annualized
loss rate by loan category and risk rating. The use of three years of loss experience data was originally used because that was the extent of the detailed loss data, by loan category and risk rating that was available at the time. This three year
historical look-back period was used until the quarter ended June 30, 2013. Starting with the quarter ended June 30, 2013, the Company will review all available detailed loss experience data, and not limit it to the most recent three years
of historical loss data. This change is intended to more accurately reflect the risk inherent in the loan portfolio by considering historical loss data for all years as the data for new periods becomes available. This change in methodology resulted
in the allowance for loan losses as of June 30, 2013 being $1,314,000 more than it would have been without this change in methodology.
During the
three months ended September 30, 2013, the Company modified its methodology used to determine the allowance for changing environmental factors. Previously, the Company compared the current value of each environmental factor to a fixed baseline
value. The deviation of the current value from the baseline value was then multiplied by a conversion factor to determine the required allowance related to each environmental factor. As of September 30, 2013, the Company replaced the fixed
baseline values with average baseline values derived from historical averages, and adjusted the conversion factors. This change is intended to more accurately reflect the risk inherent in the portfolio by recognizing that baseline, or normal, levels
for environmental factors may change over time. This change in methodology resulted in the allowance for loan losses as of September 30, 2013 being $1,665,000 more than it would have been without this change in methodology.
Loans purchased or acquired in a business combination are referred to as acquired loans. Acquired loans are valued as of the acquisition date in accordance
with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) Topic 805,
Business Combinations
. Loans acquired with evidence of credit deterioration since origination for which it is probable that all
contractually required payments will not be collected are referred to as purchased credit impaired (PCI) loans. PCI loans are accounted for under FASB ASC Topic 310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality
.
Under FASB ASC Topic 805 and FASB ASC Topic 310-30, PCI loans are recorded at fair value at acquisition date, factoring in credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for loan losses is not carried over
or recorded as of the acquisition date. Fair value is defined as the present value of the future estimated principal and interest payments of the loan, with the discount rate used in the present value calculation representing the estimated effective
yield of the loan. Default rates, loss severity, and prepayment speed assumptions are periodically reassessed and our estimate of future payments is adjusted accordingly. The difference between contractual future payments and estimated future
payments is referred to as the nonaccretable difference. The difference between estimated future payments and the present value of the estimated future payments is referred to as the accretable yield. The accretable yield represents the amount that
is expected to be recorded as interest income over the remaining life of the loan. If after acquisition, the Company determines that the estimated future cash flows of a PCI loan are expected to be more than originally estimated, an increase in the
discount rate (effective yield) would be made such that the newly increased accretable yield would be recognized, on a level yield basis, over the remaining estimated life of the loan. If, after acquisition, the Company determines that the estimated
future cash flows of a PCI loan are expected to be less than previously estimated, the discount rate would first be reduced until the present value of the reduced cash flow estimate equals the previous present value however, the discount rate may
not be lowered below its original level at acquisition. If the discount rate has been lowered to its original level and the present value has not been sufficiently lowered, an allowance for loan loss would be established through a provision for loan
losses charged to expense to decrease the present value to the required level. If the estimated cash flows improve after an allowance has been established for a loan, the allowance may be partially or fully reversed depending on the improvement in
the estimated cash flows. Only after the allowance has been fully reversed may the discount rate be increased. PCI loans are put on nonaccrual status when cash flows cannot be reasonably estimated. PCI loans on nonaccrual status are accounted for
using the cost recovery method or cash basis method of income recognition. PCI loans are charged off when evidence suggests cash flows are not recoverable. Foreclosed assets from PCI loans are recorded in foreclosed assets at fair value with the
fair value at time of foreclosure representing cash flow from the loan. ASC 310-30 allows PCI loans with similar risk characteristics and acquisition time frame to be pooled and have their cash flows aggregated as if they were one loan.
The Company elected to use the pooled method of ASC 310-30 for PCI other loans in the acquisition of certain assets and liabilities of Granite Community Bank (Granite) and Citizens Bank of Northern California
(Citizens).
Acquired loans that are not PCI loans are referred to as purchased not credit impaired (PNCI) loans. PNCI loans are accounted for
under FASB ASC Topic 310-20,
Receivables Nonrefundable Fees and Other Costs,
in which interest income is accrued on a level-yield basis for performing loans. For income recognition purposes, this method assumes that all contractual
cash flows will be collected, and no allowance for loan losses is established at the time of acquistion. Post-acquisition date, an allowance for loan losses may need to be established for acquired loans through a provision charged to earnings for
credit losses incurred subsequent to acquisition. Under ASC 310-20, the loss would be measured based on the probable shortfall in relation to the contractual note requirements, consistent with our allowance for loan loss policy for similar loans.
9
When referring to PNCI and PCI loans we will use the terms nonaccretable difference, accretable
yield, or purchase discount. Nonaccretable difference is the difference between undiscounted contractual cash flows due and undiscounted cash flows we expect to collect, or put another way, it is the undiscounted contractual cash
flows we do not expect to collect. Accretable yield is the difference between undiscounted cash flows we expect to collect and the value at which we have recorded the loan on our financial statements. On the date of acquisition, all purchased loans
are recorded on our consolidated financial statements at estimated fair value. Purchase discount is the difference between the estimated fair value of loans on the date of acquisition and the principal amount owed by the borrower, net of charge
offs, on the date of acquisition. We may also refer to discounts to principal balance of loans owed, net of charge-offs. Discounts to principal balance of loans owed, net of charge-offs is the difference between principal balance of
loans owed, net of charge-offs, and loans as recorded on our financial statements. Discounts to principal balance of loans owed, net of charge-offs arise from purchase discounts, and equal the purchase discount on the acquisition date.
Loans are also categorized as covered or noncovered. Covered loans refer to loans covered by a Federal Deposit Insurance Corporation
(FDIC) loss sharing agreement. Noncovered loans refer to loans not covered by a FDIC loss sharing agreement.
Foreclosed Assets
Foreclosed assets include assets acquired through, or in lieu of, loan foreclosure. Foreclosed assets are held for sale and are initially recorded at fair
value less estimated costs to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, management periodically performs valuations and the assets are carried at the lower of carrying amount or fair value less cost
to sell. Revenue and expenses from operations and changes in the valuation allowance are included in other noninterest expense. Gain or loss on sale of foreclosed assets is included in noninterest income. Foreclosed assets that are not subject to a
FDIC loss-share agreement are referred to as noncovered foreclosed assets.
Foreclosed assets acquired through FDIC-assisted acquisitions that are subject
to a FDIC loss-share agreement, and all assets acquired via foreclosure of covered loans are referred to as covered foreclosed assets. Covered foreclosed assets are reported exclusive of expected reimbursement cash flows from the FDIC. Foreclosed
covered loan collateral is transferred into covered foreclosed assets at the loans carrying value, inclusive of the acquisition date fair value discount.
Covered foreclosed assets are initially recorded at estimated fair value less estimated costs to sell on the acquisition date based on similar market
comparable valuations less estimated selling costs. Any subsequent valuation adjustments due to declines in fair value will be charged to noninterest expense, and will be mostly offset by noninterest income representing the corresponding increase to
the FDIC indemnification asset for the offsetting loss reimbursement amount. Any recoveries of previous valuation adjustments will be credited to noninterest expense with a corresponding charge to noninterest income for the portion of the recovery
that is due to the FDIC.
Premises and Equipment
Land is carried at cost. Land improvements, buildings and equipment, including those acquired under capital lease, are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization expenses are computed using the straight-line method over the estimated useful lives of the related assets or lease terms. Asset lives range from 3-10 years for furniture and equipment and
15-40 years for land improvements and buildings.
Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over fair value of net assets of businesses acquired. Goodwill and other intangible assets acquired in a purchase
business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to
their estimated residual values, and reviewed for impairment.
The Company has an identifiable intangible asset consisting of core deposit intangibles
(CDI). CDI are amortized over their respective estimated useful lives, and reviewed for impairment.
Impairment of Long-Lived Assets and Goodwill
Long-lived assets, such as premises and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets
to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held
for sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet.
As of December 31 of each
year, goodwill is tested for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the
assets fair value. This determination is made at the reporting unit level. The Company may choose to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely
than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less
than its carrying amount, then goodwill is deemed not to be impaired.
10
However, if the Company concludes otherwise, or if the Company elected not to first assess qualitative factors, then the Company performs the first step of a two-step impairment test by
calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. Second, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized for any
excess of the carrying amount of the reporting units goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase
price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Currently, and historically, the Company is comprised of only one reporting unit that operates within the business segment it
has identified as community banking. Goodwill was not impaired as of December 31, 2012 because the fair value of the reporting unit exceeded its carrying value.
Mortgage Servicing Rights
Mortgage servicing rights
(MSR) represent the Companys right to a future stream of cash flows based upon the contractual servicing fee associated with servicing mortgage loans. Our MSR arise from residential mortgage loans that we originate and sell, but retain the
right to service the loans. The net gain from the retention of the servicing right is included in gain on sale of loans in noninterest income when the loan is sold. Fair value is based on market prices for comparable mortgage servicing contracts,
when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net
servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Servicing fees are recorded in noninterest income when earned.
We account for MSR at fair value. The determination of fair value of our MSR requires management judgment because they are not actively traded. The
determination of fair value for MSR requires valuation processes which combine the use of discounted cash flow models and extensive analysis of current market data to arrive at an estimate of fair value. The cash flow and prepayment assumptions used
in our discounted cash flow model are based on empirical data drawn from the historical performance of our MSR, which we believe are consistent with assumptions used by market participants valuing similar MSR, and from data obtained on the
performance of similar MSR. The key assumptions used in the valuation of MSR include mortgage prepayment speeds and the discount rate. These variables can, and generally will, change from quarter to quarter as market conditions and projected
interest rates change. The key risks inherent with MSR are prepayment speed and changes in interest rates. The Company uses an independent third party to determine fair value of MSR.
Indemnification Asset
The Company accounts for amounts
receivable under loss-share agreements with the FDIC as indemnification assets in accordance with FASB ASC Topic 805,
Business Combinations
. FDIC indemnification assets are initially recorded at fair value, based on the discounted value of
expected future cash flows under the loss-share agreements. The difference between the fair value and the undiscounted cash flows the Company expects to collect from the FDIC will be accreted into noninterest income over the life of the FDIC
indemnification asset. FDIC indemnification assets are reviewed quarterly and adjusted for any changes in expected cash flows based on recent performance and expectations for future performance of the covered portfolios. These adjustments are
measured on the same basis as the related covered loans and covered other real estate owned. Any increases in cash flow of the covered assets over those expected will reduce the FDIC indemnification asset and any decreases in cash flow of the
covered assets under those expected will increase the FDIC indemnification asset. Increases and decreases to the FDIC indemnification asset are recorded as adjustments to noninterest income.
Reserve for Unfunded Commitments
The reserve for
unfunded commitments is established through a provision for losses unfunded commitments charged to noninterest expense. The reserve for unfunded commitments is an amount that Management believes will be adequate to absorb probable losses
inherent in existing commitments, including unused portions of revolving lines of credits and other loans, standby letters of credits, and unused deposit account overdraft privilege. The reserve for unfunded commitments is based on evaluations of
the collectability, and prior loss experience of unfunded commitments. The evaluations take into consideration such factors as changes in the nature and size of the loan portfolio, overall loan portfolio quality, loan concentrations, specific
problem loans and related unfunded commitments, and current economic conditions that may affect the borrowers or depositors ability to pay.
During the three months ended June 30, 2013, the Company modified the methodology employed to estimate potential losses on unfunded commitments. Similar
to the Allowance for Loan and Lease Losses, the Company performs a migration analysis of historical loss experience. Prior to this quarter, the loss experience of each quarter over the previous three years was reviewed in order to calculate an
annualized loss rate by loan category. Going forward, the Company has chosen to review all loss experience available since the conversion to a loss migration analysis. This change is intended to more accurately reflect the risk inherent in the
unfunded commitments and appropriately consider all losses incurred in prior years. This change in methodology resulted in the reserve for unfunded commitments as of June 30, 2013 being $335,000 more than it would have been without this change
in methodology.
Income Taxes
The Companys
accounting for income taxes is based on an asset and liability approach. The Company recognizes the amount of taxes payable or refundable for the current year, and deferred tax assets and liabilities for the future tax consequences that have been
recognized in its financial statements or tax returns. The measurement of tax assets and liabilities is based on the provisions of enacted tax laws. A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to
be realized. Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. Although realization is not assured, management believes it is more likely
than not that all of the deferred tax assets will be realized. Interest and/or penalties related to income taxes are reported as a component of noninterest income.
11
Off-Balance Sheet Credit Related Financial Instruments
In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under credit card arrangements, commercial
letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.
Geographical Descriptions
For the purpose of describing the geographical location of the Companys loans, the Company has defined northern California as that area of California
north of, and including, Stockton; central California as that area of the state south of Stockton, to and including, Bakersfield; and southern California as that area of the state south of Bakersfield.
Reclassifications
Certain amounts reported in previous
consolidated financial statements have been reclassified to conform to the presentation in this report. These reclassifications did not affect previously reported net income or total shareholders equity.
Recent Accounting Pronouncements
FASB issued Accounting
Standards Update (ASU) No. 2012-06,
Business Combinations (Topic 805): Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial
Institution.
ASU 2012-06 requires that when a reporting entity recognizes an indemnification asset (in accordance with Subtopic 805-20) as a result of a government-assisted acquisition of a financial institution and subsequently a change in the
cash flows expected to be collected on the indemnification asset occurs (as a result of a change in cash flows expected to be collected on the assets subject to indemnification), the reporting entity should subsequently account for the change in the
measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the contractual term of the indemnification agreement (that is, the lesser
of the term of the indemnification agreement and the remaining life of the indemnified assets). The Company adopted this Standard on January 1, 2013, and the adoption did not have a significant impact on the Companys consolidated
financial statements.
FASB issued ASU No. 2013-02,
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income.
ASU 2013-02 amends recent guidance related to the reporting of comprehensive income to enhance the reporting of reclassifications out of accumulated other comprehensive income. The Company adopted this Standard on
January 1, 2013, and the adoption did not have a significant impact on the Companys consolidated financial statements.
Note 2 - Business Combinations
On September 23, 2011, the California Department of Financial Institutions closed Citizens Bank of Northern California
(Citizens), Nevada City, California and appointed the FDIC as receiver. That same date, the Bank assumed the banking operations of Citizens from the FDIC under a whole bank purchase and assumption agreement without loss sharing.
On May 28, 2010, the Office of the Comptroller of the Currency closed Granite Community Bank (Granite), Granite Bay, California and appointed
the FDIC as receiver. That same date, the Bank assumed the banking operations of Granite from the FDIC under a whole bank purchase and assumption agreement with loss sharing. Under the terms of the loss sharing agreement, the FDIC will cover a
substantial portion of any future losses on loans, related unfunded loan commitments, other real estate owned (OREO)/foreclosed assets and accrued interest on loans for up to 90 days. The FDIC will absorb 80% of losses and share in 80% of loss
recoveries on the covered assets acquired from Granite. The loss sharing arrangements for non-single family residential and single family residential loans are in effect for 5 years and 10 years, respectively, and the loss recovery provisions are in
effect for 8 years and 10 years, respectively, from the acquisition date.
12
Note 3 - Investment Securities
The amortized cost and estimated fair values of investments in debt and equity securities are summarized in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(in thousands)
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
100,629
|
|
|
$
|
4,970
|
|
|
$
|
(198
|
)
|
|
$
|
105,401
|
|
Obligations of states and political subdivisions
|
|
|
7,777
|
|
|
|
128
|
|
|
|
|
|
|
|
7,905
|
|
Corporate debt securities
|
|
|
1,873
|
|
|
|
36
|
|
|
|
|
|
|
|
1,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
110,279
|
|
|
$
|
5,134
|
|
|
$
|
(198
|
)
|
|
$
|
115,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
180,612
|
|
|
$
|
1,299
|
|
|
$
|
(2,905
|
)
|
|
$
|
179,006
|
|
Obligations of states and political subdivisions
|
|
|
12,650
|
|
|
|
|
|
|
|
(1,415
|
)
|
|
|
11,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
193,262
|
|
|
$
|
1,299
|
|
|
$
|
(4,320
|
)
|
|
$
|
190,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(in thousands)
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
143,633
|
|
|
$
|
8,068
|
|
|
|
|
|
|
$
|
151,701
|
|
Obligations of states and political subdivisions
|
|
|
9,098
|
|
|
|
323
|
|
|
|
|
|
|
|
9,421
|
|
Corporate debt securities
|
|
|
1,862
|
|
|
|
43
|
|
|
|
|
|
|
|
1,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
154,593
|
|
|
$
|
8,434
|
|
|
|
|
|
|
$
|
163,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had no investment securities held to maturity at December 31, 2012.
No investment securities were sold during the nine months ended September 30, 2013 or the year ended December 31, 2012. Investment securities with
an aggregate carrying value of $66,442,000 and $66,911,000 at September 30, 2013 and December 31, 2012, respectively, were pledged as collateral for specific borrowings, lines of credit and local agency deposits.
13
Note 3 - Investment Securities (continued)
The amortized cost and estimated fair value of debt securities at September 30, 2013 by contractual
maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. At September 30, 2013, obligations of U.S.
government corporations and agencies with a cost basis totaling $281,241,000 consist almost entirely of mortgage-backed securities whose contractual maturity, or principal repayment, will follow the repayment of the underlying mortgages. For
purposes of the following table, the entire outstanding balance of these mortgage-backed securities issued by U.S. government corporations and agencies is categorized based on final maturity date. At September 30, 2013, the Company estimates
the average remaining life of these mortgage-backed securities issued by U.S. government corporations and agencies to be approximately 5.6 years. Average remaining life is defined as the time span after which the principal balance has been reduced
by half.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Securities
|
|
Available for Sale
|
|
|
Held to Maturity
|
|
(In thousands)
|
|
Amortized
|
|
|
Estimated
|
|
|
Amortized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
Due in one year
|
|
$
|
2,554
|
|
|
$
|
2,594
|
|
|
|
|
|
|
|
|
|
Due after one year through five years
|
|
|
4,514
|
|
|
|
4,699
|
|
|
|
|
|
|
|
|
|
Due after five years through ten years
|
|
|
34,963
|
|
|
|
36,190
|
|
|
|
|
|
|
|
|
|
Due after ten years
|
|
|
68,248
|
|
|
|
71,732
|
|
|
$
|
193,262
|
|
|
$
|
190,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
110,279
|
|
|
$
|
115,215
|
|
|
$
|
193,262
|
|
|
$
|
190,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment
category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
September 30, 2013:
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
|
(In thousands)
|
|
Investment Securities Available for Sale:
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
10,962
|
|
|
$
|
(198
|
)
|
|
|
|
|
|
|
|
|
|
$
|
10,962
|
|
|
$
|
(198
|
)
|
Obligations of states and political subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities Available for Sale
|
|
$
|
10,962
|
|
|
$
|
(198
|
)
|
|
|
|
|
|
|
|
|
|
$
|
10,962
|
|
|
$
|
(198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Securities Held to Maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
69,193
|
|
|
$
|
(2,905
|
)
|
|
|
|
|
|
|
|
|
|
$
|
69,193
|
|
|
$
|
(2,905
|
)
|
Obligations of states and political subdivisions
|
|
|
11,235
|
|
|
|
(1,415
|
)
|
|
|
|
|
|
|
|
|
|
|
11,235
|
|
|
|
(1,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities Held to Maturity
|
|
$
|
80,428
|
|
|
$
|
(4,320
|
)
|
|
|
|
|
|
|
|
|
|
$
|
80,428
|
|
|
$
|
(4,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012, the Company had no investment securities with gross unrealized losses.
Obligations of U.S. government corporations and agencies: Unrealized losses on investments in obligations of U.S. government corporations and
agencies are caused by interest rate increases. The contractual cash flows of these securities are guaranteed by U.S. Government Sponsored Entities (principally Fannie Mae and Freddie Mac). It is expected that the securities would not be settled at
a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be
required to sell these securities, these investments are not considered other-than-temporarily impaired. At September 30, 2013, 10 debt securities representing obligations of U.S. government corporations and agencies had unrealized losses with
aggregate depreciation of 3.73% from the Companys amortized cost basis.
Obligations of states and political subdivisions: The unrealized losses on
investments in obligations of states and political subdivisions were caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than the amortized cost of
the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell these securities, these
investments are not considered other-than-temporarily impaired. At September 30, 2013, 14 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 11.19% from the
Companys amortized cost basis.
14
Note 4 Loans
A summary of loan balances follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
|
|
|
|
|
|
|
PCI -
|
|
|
PCI -
|
|
|
|
|
|
|
Originated
|
|
|
PNCI
|
|
|
Cash basis
|
|
|
Other
|
|
|
Total
|
|
Mortgage loans on real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential 1-4 family
|
|
$
|
128,974
|
|
|
$
|
61,808
|
|
|
|
|
|
|
$
|
6,347
|
|
|
$
|
197,129
|
|
Commercial
|
|
|
801,570
|
|
|
|
62,104
|
|
|
|
|
|
|
|
30,672
|
|
|
|
894,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loan on real estate
|
|
|
930,544
|
|
|
|
123,912
|
|
|
|
|
|
|
|
37,019
|
|
|
|
1,091,475
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
|
321,512
|
|
|
|
14,367
|
|
|
$
|
6,452
|
|
|
|
4,017
|
|
|
|
346,348
|
|
Home equity loans
|
|
|
12,845
|
|
|
|
281
|
|
|
|
49
|
|
|
|
555
|
|
|
|
13,730
|
|
Auto Indirect
|
|
|
1,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,351
|
|
Other
|
|
|
26,106
|
|
|
|
2,101
|
|
|
|
|
|
|
|
75
|
|
|
|
28,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer loans
|
|
|
361,814
|
|
|
|
16,749
|
|
|
|
6,501
|
|
|
|
4,647
|
|
|
|
389,711
|
|
Commercial
|
|
|
126,034
|
|
|
|
775
|
|
|
|
25
|
|
|
|
6,782
|
|
|
|
133,616
|
|
Construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
26,369
|
|
|
|
|
|
|
|
|
|
|
|
1,232
|
|
|
|
27,601
|
|
Commercial
|
|
|
14,074
|
|
|
|
|
|
|
|
|
|
|
|
574
|
|
|
|
14,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total construction
|
|
|
40,443
|
|
|
|
|
|
|
|
|
|
|
|
1,806
|
|
|
|
42,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of deferred loan fees
|
|
$
|
1,458,835
|
|
|
$
|
141,436
|
|
|
$
|
6,526
|
|
|
$
|
50,254
|
|
|
$
|
1,657,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal balance of loans owed, net of charge-offs
|
|
$
|
1,462,146
|
|
|
$
|
150,042
|
|
|
$
|
17,398
|
|
|
$
|
62,239
|
|
|
$
|
1,691,825
|
|
Unamortized net deferred loan fees
|
|
|
(3,311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,311
|
)
|
(Discounts) premiums, net, to principal balance of loans owed, net of charge-offs
|
|
|
|
|
|
|
(8,606
|
)
|
|
|
(10,872
|
)
|
|
|
(11,985
|
)
|
|
|
(31,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees
|
|
$
|
1,458,835
|
|
|
$
|
141,436
|
|
|
$
|
6,526
|
|
|
$
|
50,254
|
|
|
$
|
1,657,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncovered loans
|
|
$
|
1,458,835
|
|
|
$
|
141,436
|
|
|
$
|
6,526
|
|
|
$
|
19,685
|
|
|
$
|
1,626,482
|
|
Covered loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,569
|
|
|
|
30,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees
|
|
$
|
1,458,835
|
|
|
$
|
141,436
|
|
|
$
|
6,526
|
|
|
$
|
50,254
|
|
|
$
|
1,657,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
(32,307
|
)
|
|
$
|
(2,800
|
)
|
|
$
|
(899
|
)
|
|
$
|
(3,334
|
)
|
|
$
|
(39,340
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Note 4 Loans (continued)
A summary of loan balances follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
PCI -
|
|
|
PCI -
|
|
|
|
|
|
|
Originated
|
|
|
PNCI
|
|
|
Cash basis
|
|
|
Other
|
|
|
Total
|
|
Mortgage loans on real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential 1-4 family
|
|
$
|
121,255
|
|
|
$
|
5,413
|
|
|
|
|
|
|
$
|
5,016
|
|
|
$
|
131,684
|
|
Commercial
|
|
|
775,124
|
|
|
|
72,090
|
|
|
$
|
1,289
|
|
|
|
29,943
|
|
|
|
878,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loan on real estate
|
|
|
896,379
|
|
|
|
77,503
|
|
|
|
1,289
|
|
|
|
34,959
|
|
|
|
1,010,130
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
|
311,671
|
|
|
|
16,788
|
|
|
|
7,612
|
|
|
|
5,954
|
|
|
|
342,025
|
|
Home equity loans
|
|
|
13,011
|
|
|
|
342
|
|
|
|
49
|
|
|
|
155
|
|
|
|
13,557
|
|
Auto Indirect
|
|
|
3,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,816
|
|
Other
|
|
|
24,263
|
|
|
|
2,418
|
|
|
|
|
|
|
|
32
|
|
|
|
26,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer loans
|
|
|
352,761
|
|
|
|
19,548
|
|
|
|
7,661
|
|
|
|
6,141
|
|
|
|
386,111
|
|
Commercial
|
|
|
125,122
|
|
|
|
869
|
|
|
|
22
|
|
|
|
9,515
|
|
|
|
135,528
|
|
Construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
11,877
|
|
|
|
|
|
|
|
|
|
|
|
6,582
|
|
|
|
18,459
|
|
Commercial
|
|
|
11,196
|
|
|
|
|
|
|
|
|
|
|
|
3,399
|
|
|
|
14,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total construction
|
|
|
23,073
|
|
|
|
|
|
|
|
|
|
|
|
9,981
|
|
|
|
33,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of deferred loan fees
|
|
$
|
1,397,335
|
|
|
$
|
97,920
|
|
|
$
|
8,972
|
|
|
$
|
60,596
|
|
|
$
|
1,564,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal balance of loans owed, net of charge-offs
|
|
$
|
1,400,147
|
|
|
$
|
111,286
|
|
|
$
|
20,621
|
|
|
$
|
75,277
|
|
|
$
|
1,607,331
|
|
Unamortized net deferred loan fees
|
|
|
(2,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,812
|
)
|
(Discounts) premiums, net, to principal balance of loans owed, net of charge-offs
|
|
|
|
|
|
|
(13,366
|
)
|
|
|
(11,649
|
)
|
|
|
(14,681
|
)
|
|
|
(39,696
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees
|
|
$
|
1,397,335
|
|
|
$
|
97,920
|
|
|
$
|
8,972
|
|
|
$
|
60,596
|
|
|
$
|
1,564,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncovered loans
|
|
$
|
1,397,335
|
|
|
$
|
97,920
|
|
|
$
|
8,972
|
|
|
$
|
18,708
|
|
|
$
|
1,522,935
|
|
Covered loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,888
|
|
|
|
41,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees
|
|
$
|
1,397,335
|
|
|
$
|
97,920
|
|
|
$
|
8,972
|
|
|
$
|
60,596
|
|
|
$
|
1,564,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
(35,769
|
)
|
|
$
|
(1,969
|
)
|
|
$
|
(1,054
|
)
|
|
$
|
(3,856
|
)
|
|
$
|
(42,648
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the change in accretable yield for PCI other loans during the periods indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended Sept. 30,
|
|
|
Nine months ended Sept. 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Change in accretable yield:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
19,727
|
|
|
$
|
23,732
|
|
|
$
|
22,337
|
|
|
$
|
25,145
|
|
Accretion to interest income
|
|
|
(1,656
|
)
|
|
|
(2,037
|
)
|
|
|
(4,847
|
)
|
|
|
(5,921
|
)
|
Reclassification from nonaccretable difference
|
|
|
1,850
|
|
|
|
2,385
|
|
|
|
2,431
|
|
|
|
4,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
19,921
|
|
|
$
|
24,080
|
|
|
$
|
19,921
|
|
|
$
|
24,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Throughout these consolidated financial statements, and in particular in this Note 4 and Note 5, when we refer to
Loans or Allowance for loan losses we mean all categories of loans, including Originated, PNCI, PCI cash basis, and PCI - other. When we are not referring to all categories of loans, we will indicate which we are
referring to Originated, PNCI, PCI cash basis, or PCI - other.
16
Note 5 Allowance for Loan Losses
The following tables summarize the activity in the allowance for loan losses, and ending balance of loans, net of unearned fees for the
periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses Three months ended September 30, 2013
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Beginning balance
|
|
$
|
3,231
|
|
|
$
|
8,764
|
|
|
$
|
18,710
|
|
|
$
|
1,109
|
|
|
$
|
114
|
|
|
$
|
567
|
|
|
$
|
4,929
|
|
|
$
|
1,288
|
|
|
$
|
887
|
|
|
$
|
39,599
|
|
Charge-offs
|
|
|
(4
|
)
|
|
|
(23
|
)
|
|
|
(331
|
)
|
|
|
(30
|
)
|
|
|
(9
|
)
|
|
|
(239
|
)
|
|
|
(318
|
)
|
|
|
|
|
|
|
(31
|
)
|
|
|
(985
|
)
|
Recoveries
|
|
|
154
|
|
|
|
295
|
|
|
|
304
|
|
|
|
3
|
|
|
|
34
|
|
|
|
199
|
|
|
|
108
|
|
|
|
2
|
|
|
|
20
|
|
|
|
1,119
|
|
(Benefit) provision
|
|
|
(190
|
)
|
|
|
704
|
|
|
|
(871
|
)
|
|
|
(50
|
)
|
|
|
(58
|
)
|
|
|
7
|
|
|
|
(234
|
)
|
|
|
157
|
|
|
|
142
|
|
|
|
(393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
3,191
|
|
|
$
|
9,740
|
|
|
$
|
17,812
|
|
|
$
|
1,032
|
|
|
$
|
81
|
|
|
$
|
534
|
|
|
$
|
4,485
|
|
|
$
|
1,447
|
|
|
$
|
1,018
|
|
|
$
|
39,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses As of and nine months ended September 30, 2013
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Beginning balance
|
|
$
|
3,523
|
|
|
$
|
8,782
|
|
|
$
|
21,367
|
|
|
$
|
1,155
|
|
|
$
|
243
|
|
|
$
|
696
|
|
|
$
|
4,703
|
|
|
$
|
1,400
|
|
|
$
|
779
|
|
|
$
|
42,648
|
|
Charge-offs
|
|
|
(46
|
)
|
|
|
(1,712
|
)
|
|
|
(1,843
|
)
|
|
|
(56
|
)
|
|
|
(67
|
)
|
|
|
(724
|
)
|
|
|
(1,143
|
)
|
|
|
(20
|
)
|
|
|
(92
|
)
|
|
|
(5,703
|
)
|
Recoveries
|
|
|
345
|
|
|
|
965
|
|
|
|
809
|
|
|
|
29
|
|
|
|
180
|
|
|
|
601
|
|
|
|
244
|
|
|
|
63
|
|
|
|
46
|
|
|
|
3,282
|
|
(Benefit) provision
|
|
|
(631
|
)
|
|
|
1,705
|
|
|
|
(2,521
|
)
|
|
|
(96
|
)
|
|
|
(275
|
)
|
|
|
(39
|
)
|
|
|
681
|
|
|
|
4
|
|
|
|
285
|
|
|
|
(887
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
3,191
|
|
|
$
|
9,740
|
|
|
$
|
17,812
|
|
|
$
|
1,032
|
|
|
$
|
81
|
|
|
$
|
534
|
|
|
$
|
4,485
|
|
|
$
|
1,447
|
|
|
$
|
1,018
|
|
|
$
|
39,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
623
|
|
|
$
|
1,446
|
|
|
$
|
1,554
|
|
|
$
|
49
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
$
|
678
|
|
|
$
|
91
|
|
|
$
|
9
|
|
|
$
|
4,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
2,235
|
|
|
$
|
7,748
|
|
|
$
|
15,259
|
|
|
$
|
983
|
|
|
$
|
79
|
|
|
$
|
521
|
|
|
$
|
2,450
|
|
|
$
|
723
|
|
|
$
|
653
|
|
|
$
|
30,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
333
|
|
|
$
|
546
|
|
|
$
|
999
|
|
|
|
|
|
|
|
|
|
|
$
|
7
|
|
|
$
|
1,358
|
|
|
$
|
633
|
|
|
$
|
356
|
|
|
$
|
4,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned fees As of September 30, 2013
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
197,129
|
|
|
$
|
894,346
|
|
|
$
|
346,348
|
|
|
$
|
13,730
|
|
|
$
|
1,351
|
|
|
$
|
28,282
|
|
|
$
|
133,616
|
|
|
$
|
27,601
|
|
|
$
|
14,648
|
|
|
$
|
1,657,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
7,013
|
|
|
$
|
69,373
|
|
|
$
|
7,664
|
|
|
$
|
551
|
|
|
$
|
66
|
|
|
$
|
94
|
|
|
$
|
3,333
|
|
|
$
|
2,872
|
|
|
$
|
252
|
|
|
$
|
91,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
183,769
|
|
|
$
|
794,301
|
|
|
$
|
328,215
|
|
|
$
|
12,575
|
|
|
$
|
1,285
|
|
|
$
|
28,113
|
|
|
$
|
123,476
|
|
|
$
|
23,497
|
|
|
$
|
13,822
|
|
|
$
|
1,509,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
6,347
|
|
|
$
|
30,672
|
|
|
$
|
10,469
|
|
|
$
|
604
|
|
|
|
|
|
|
$
|
75
|
|
|
$
|
6,807
|
|
|
$
|
1,232
|
|
|
$
|
574
|
|
|
$
|
56,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses As of and year ended December 31, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Beginning balance
|
|
$
|
2,404
|
|
|
$
|
13,217
|
|
|
$
|
18,258
|
|
|
$
|
1,101
|
|
|
$
|
215
|
|
|
$
|
932
|
|
|
$
|
6,545
|
|
|
$
|
1,817
|
|
|
$
|
1,425
|
|
|
$
|
45,914
|
|
Charge-offs
|
|
|
(1,558
|
)
|
|
|
(3,457
|
)
|
|
|
(8,042
|
)
|
|
|
(385
|
)
|
|
|
(83
|
)
|
|
|
(1,202
|
)
|
|
|
(1,251
|
)
|
|
|
(406
|
)
|
|
|
(100
|
)
|
|
|
(16,484
|
)
|
Recoveries
|
|
|
147
|
|
|
|
1,020
|
|
|
|
398
|
|
|
|
100
|
|
|
|
215
|
|
|
|
860
|
|
|
|
643
|
|
|
|
412
|
|
|
|
|
|
|
|
3,795
|
|
Provision (benefit)
|
|
|
2,530
|
|
|
|
(1,998
|
)
|
|
|
10,753
|
|
|
|
339
|
|
|
|
(104
|
)
|
|
|
106
|
|
|
|
(1,234
|
)
|
|
|
(423
|
)
|
|
|
(546
|
)
|
|
|
9,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
3,523
|
|
|
$
|
8,782
|
|
|
$
|
21,367
|
|
|
$
|
1,155
|
|
|
$
|
243
|
|
|
$
|
696
|
|
|
$
|
4,703
|
|
|
$
|
1,400
|
|
|
$
|
779
|
|
|
$
|
42,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
631
|
|
|
$
|
515
|
|
|
$
|
2,264
|
|
|
$
|
81
|
|
|
$
|
5
|
|
|
$
|
47
|
|
|
$
|
840
|
|
|
$
|
11
|
|
|
$
|
111
|
|
|
$
|
4,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
2,526
|
|
|
$
|
8,026
|
|
|
$
|
17,862
|
|
|
$
|
995
|
|
|
$
|
238
|
|
|
$
|
649
|
|
|
$
|
2,342
|
|
|
$
|
430
|
|
|
$
|
165
|
|
|
$
|
33,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
366
|
|
|
$
|
241
|
|
|
$
|
1,241
|
|
|
$
|
79
|
|
|
|
|
|
|
|
|
|
|
$
|
1,521
|
|
|
$
|
959
|
|
|
$
|
503
|
|
|
$
|
4,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Note 5 Allowance for Loan Losses (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned fees As of December 31, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
131,684
|
|
|
$
|
878,446
|
|
|
$
|
342,025
|
|
|
$
|
13,557
|
|
|
$
|
3,816
|
|
|
$
|
26,713
|
|
|
$
|
135,528
|
|
|
$
|
18,459
|
|
|
$
|
14,595
|
|
|
$
|
1,564,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
6,586
|
|
|
$
|
71,077
|
|
|
$
|
10,056
|
|
|
$
|
528
|
|
|
$
|
197
|
|
|
$
|
121
|
|
|
$
|
8,562
|
|
|
$
|
3,596
|
|
|
$
|
607
|
|
|
$
|
101,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
120,082
|
|
|
$
|
776,137
|
|
|
$
|
318,403
|
|
|
$
|
12,825
|
|
|
$
|
3,619
|
|
|
$
|
26,560
|
|
|
$
|
117,429
|
|
|
$
|
8,281
|
|
|
$
|
10,589
|
|
|
$
|
1,393,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
5,016
|
|
|
$
|
31,232
|
|
|
$
|
13,566
|
|
|
$
|
204
|
|
|
|
|
|
|
$
|
32
|
|
|
$
|
9,537
|
|
|
$
|
6,582
|
|
|
$
|
3,399
|
|
|
$
|
69,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses Three months ended September 30, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Beginning balance
|
|
$
|
3,458
|
|
|
$
|
9,566
|
|
|
$
|
21,602
|
|
|
$
|
1,159
|
|
|
$
|
433
|
|
|
$
|
621
|
|
|
$
|
5,694
|
|
|
$
|
1,679
|
|
|
$
|
1,637
|
|
|
$
|
45,849
|
|
Charge-offs
|
|
|
(370
|
)
|
|
|
(340
|
)
|
|
|
(1,636
|
)
|
|
|
(12
|
)
|
|
|
(12
|
)
|
|
|
(280
|
)
|
|
|
(625
|
)
|
|
|
|
|
|
|
(93
|
)
|
|
|
(3,368
|
)
|
Recoveries
|
|
|
|
|
|
|
181
|
|
|
|
160
|
|
|
|
6
|
|
|
|
72
|
|
|
|
211
|
|
|
|
91
|
|
|
|
412
|
|
|
|
|
|
|
|
1,133
|
|
Provision (benefit)
|
|
|
492
|
|
|
|
630
|
|
|
|
1,176
|
|
|
|
100
|
|
|
|
(161
|
)
|
|
|
132
|
|
|
|
(389
|
)
|
|
|
(802
|
)
|
|
|
(646
|
)
|
|
|
532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
3,580
|
|
|
$
|
10,037
|
|
|
$
|
21,302
|
|
|
$
|
1,253
|
|
|
$
|
332
|
|
|
$
|
684
|
|
|
$
|
4,771
|
|
|
$
|
1,289
|
|
|
$
|
898
|
|
|
$
|
44,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses As of and nine months ended September 30, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Beginning balance
|
|
$
|
2,404
|
|
|
$
|
13,217
|
|
|
$
|
18,258
|
|
|
$
|
1,101
|
|
|
$
|
215
|
|
|
$
|
932
|
|
|
$
|
6,545
|
|
|
$
|
1,817
|
|
|
$
|
1,425
|
|
|
$
|
45,914
|
|
Charge-offs
|
|
|
(918
|
)
|
|
|
(2,008
|
)
|
|
|
(6,739
|
)
|
|
|
(170
|
)
|
|
|
(83
|
)
|
|
|
(928
|
)
|
|
|
(1,202
|
)
|
|
|
(362
|
)
|
|
|
(68
|
)
|
|
|
(12,478
|
)
|
Recoveries
|
|
|
27
|
|
|
|
999
|
|
|
|
307
|
|
|
|
15
|
|
|
|
171
|
|
|
|
653
|
|
|
|
227
|
|
|
|
412
|
|
|
|
|
|
|
|
2,811
|
|
Provision
|
|
|
2,067
|
|
|
|
(2,171
|
)
|
|
|
9,476
|
|
|
|
307
|
|
|
|
29
|
|
|
|
27
|
|
|
|
(799
|
)
|
|
|
(578
|
)
|
|
|
(459
|
)
|
|
|
7,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
3,580
|
|
|
$
|
10,037
|
|
|
$
|
21,302
|
|
|
$
|
1,253
|
|
|
$
|
332
|
|
|
$
|
684
|
|
|
$
|
4,771
|
|
|
$
|
1,289
|
|
|
$
|
898
|
|
|
$
|
44,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
794
|
|
|
$
|
1,234
|
|
|
$
|
2,140
|
|
|
$
|
174
|
|
|
$
|
9
|
|
|
$
|
45
|
|
|
$
|
773
|
|
|
$
|
40
|
|
|
$
|
550
|
|
|
$
|
5,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
2,415
|
|
|
$
|
8,239
|
|
|
$
|
17,899
|
|
|
$
|
999
|
|
|
$
|
324
|
|
|
$
|
640
|
|
|
$
|
2,445
|
|
|
$
|
465
|
|
|
$
|
81
|
|
|
$
|
33,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
371
|
|
|
$
|
564
|
|
|
$
|
1,263
|
|
|
$
|
79
|
|
|
|
|
|
|
|
|
|
|
$
|
1,553
|
|
|
$
|
783
|
|
|
$
|
267
|
|
|
$
|
4,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned fees As of September 30, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
134,041
|
|
|
$
|
873,391
|
|
|
$
|
342,898
|
|
|
$
|
14,270
|
|
|
$
|
5,067
|
|
|
$
|
26,609
|
|
|
$
|
145,469
|
|
|
$
|
18,332
|
|
|
$
|
15,570
|
|
|
$
|
1,575,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
9,285
|
|
|
$
|
68,887
|
|
|
$
|
9,946
|
|
|
$
|
683
|
|
|
$
|
260
|
|
|
$
|
136
|
|
|
$
|
8,696
|
|
|
$
|
4,126
|
|
|
$
|
6,955
|
|
|
$
|
108,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
118,702
|
|
|
$
|
771,971
|
|
|
$
|
318,987
|
|
|
$
|
13,383
|
|
|
$
|
4,807
|
|
|
$
|
26,450
|
|
|
$
|
124,487
|
|
|
$
|
6,448
|
|
|
$
|
5,089
|
|
|
$
|
1,390,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
6,054
|
|
|
$
|
32,533
|
|
|
$
|
13,965
|
|
|
$
|
204
|
|
|
|
|
|
|
$
|
23
|
|
|
$
|
12,286
|
|
|
$
|
7,758
|
|
|
$
|
3,526
|
|
|
$
|
76,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Note 5 Allowance for Loan Losses (continued)
As part of the on-going monitoring of the credit quality of the Companys loan portfolio, management
tracks certain credit quality indicators including, but not limited to, trends relating to (i) the level of criticized and classified loans, (ii) net charge-offs, (iii) non-performing loans, and (iv) delinquency within the
portfolio.
The Company utilizes a risk grading system to assign a risk grade to each of its loans. Loans are graded on a scale ranging from Pass to Loss.
A description of the general characteristics of the risk grades is as follows:
|
|
|
Pass
This grade represents loans ranging from acceptable to very little or no credit risk. These loans typically meet most if not all policy standards in regard to: loan amount as a percentage of
collateral value, debt service coverage, profitability, leverage, and working capital.
|
|
|
|
Special Mention
This grade represents Other Assets Especially Mentioned in accordance with regulatory guidelines and includes loans that display some potential weaknesses which, if left
unaddressed, may result in deterioration of the repayment prospects for the asset or may inadequately protect the Companys position in the future. These loans warrant more than normal supervision and attention.
|
|
|
|
Substandard
This grade represents Substandard loans in accordance with regulatory guidelines. Loans within this rating typically exhibit weaknesses that are well defined to the point that
repayment is jeopardized. Loss potential is, however, not necessarily evident. The underlying collateral supporting the credit appears to have sufficient value to protect the Company from loss of principal and accrued interest, or the loan has been
written down to the point where this is true. There is a definite need for a well defined workout/rehabilitation program.
|
|
|
|
Doubtful
This grade represents Doubtful loans in accordance with regulatory guidelines. An asset classified as Doubtful has all the weaknesses inherent in a loan classified Substandard with the
added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Pending factors include proposed merger, acquisition, or
liquidation procedures, capital injection, perfecting liens on additional collateral, and financing plans.
|
|
|
|
Loss
This grade represents Loss loans in accordance with regulatory guidelines. A loan classified as Loss is considered uncollectible and of such little value that its continuance as a bankable
asset is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan, even though some recovery may be affected in the
future. The portion of the loan that is graded loss should be charged off no later than the end of the quarter in which the loss is identified.
|
The following tables present ending loan balances by loan category and risk grade as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Indicators As of September 30, 2013
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Originated loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
120,824
|
|
|
$
|
731,319
|
|
|
$
|
308,997
|
|
|
$
|
11,827
|
|
|
$
|
1,051
|
|
|
$
|
25,462
|
|
|
$
|
121,901
|
|
|
$
|
22,205
|
|
|
$
|
13,268
|
|
|
$
|
1,356,854
|
|
Special mention
|
|
|
968
|
|
|
|
20,660
|
|
|
|
2,731
|
|
|
|
217
|
|
|
|
157
|
|
|
|
529
|
|
|
|
740
|
|
|
|
98
|
|
|
|
520
|
|
|
|
26,620
|
|
Substandard
|
|
|
7,182
|
|
|
|
49,591
|
|
|
|
9,784
|
|
|
|
801
|
|
|
|
143
|
|
|
|
115
|
|
|
|
3,393
|
|
|
|
4,066
|
|
|
|
286
|
|
|
|
75,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Originated loans
|
|
$
|
128,974
|
|
|
$
|
801,570
|
|
|
$
|
321,512
|
|
|
$
|
12,845
|
|
|
$
|
1,351
|
|
|
$
|
26,106
|
|
|
$
|
126,034
|
|
|
$
|
26,369
|
|
|
$
|
14,074
|
|
|
$
|
1,458,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
61,123
|
|
|
$
|
55,446
|
|
|
$
|
13,466
|
|
|
$
|
281
|
|
|
|
|
|
|
$
|
2,039
|
|
|
$
|
450
|
|
|
|
|
|
|
|
|
|
|
$
|
132,805
|
|
Special mention
|
|
|
|
|
|
|
3,060
|
|
|
|
177
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
325
|
|
|
|
|
|
|
|
|
|
|
|
3,586
|
|
Substandard
|
|
|
685
|
|
|
|
3,598
|
|
|
|
724
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI loans
|
|
$
|
61,808
|
|
|
$
|
62,104
|
|
|
$
|
14,367
|
|
|
$
|
281
|
|
|
|
|
|
|
$
|
2,101
|
|
|
$
|
775
|
|
|
|
|
|
|
|
|
|
|
$
|
141,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans
|
|
$
|
6,347
|
|
|
$
|
30,672
|
|
|
$
|
10,469
|
|
|
$
|
604
|
|
|
|
|
|
|
$
|
75
|
|
|
$
|
6,807
|
|
|
$
|
1,232
|
|
|
$
|
574
|
|
|
$
|
56,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
197,129
|
|
|
$
|
894,346
|
|
|
$
|
346,348
|
|
|
$
|
13,730
|
|
|
$
|
1,351
|
|
|
$
|
28,282
|
|
|
$
|
133,616
|
|
|
$
|
27,601
|
|
|
$
|
14,648
|
|
|
$
|
1,657,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Indicators As of December 31, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Originated loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
108,946
|
|
|
$
|
686,593
|
|
|
$
|
291,701
|
|
|
$
|
11,892
|
|
|
$
|
2,949
|
|
|
$
|
23,154
|
|
|
$
|
113,595
|
|
|
$
|
7,744
|
|
|
$
|
10,221
|
|
|
$
|
1,256,795
|
|
Special mention
|
|
|
3,122
|
|
|
|
21,184
|
|
|
|
6,955
|
|
|
|
555
|
|
|
|
531
|
|
|
|
958
|
|
|
|
3,224
|
|
|
|
285
|
|
|
|
356
|
|
|
|
37,170
|
|
Substandard
|
|
|
9,187
|
|
|
|
67,347
|
|
|
|
13,015
|
|
|
|
564
|
|
|
|
336
|
|
|
|
151
|
|
|
|
8,303
|
|
|
|
3,848
|
|
|
|
619
|
|
|
|
103,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Originated loans
|
|
$
|
121,255
|
|
|
$
|
775,124
|
|
|
$
|
311,671
|
|
|
$
|
13,011
|
|
|
$
|
3,816
|
|
|
$
|
24,263
|
|
|
$
|
125,122
|
|
|
$
|
11,877
|
|
|
$
|
11,196
|
|
|
$
|
1,397,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
4,968
|
|
|
$
|
64,917
|
|
|
$
|
15,915
|
|
|
$
|
342
|
|
|
|
|
|
|
$
|
2,240
|
|
|
$
|
848
|
|
|
|
|
|
|
|
|
|
|
$
|
89,230
|
|
Special mention
|
|
|
|
|
|
|
5,249
|
|
|
|
193
|
|
|
|
|
|
|
|
|
|
|
|
104
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
5,567
|
|
Substandard
|
|
|
436
|
|
|
|
1,924
|
|
|
|
680
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,114
|
|
Loss
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI loans
|
|
$
|
5,413
|
|
|
$
|
72,090
|
|
|
$
|
16,788
|
|
|
$
|
342
|
|
|
|
|
|
|
$
|
2,418
|
|
|
$
|
869
|
|
|
|
|
|
|
|
|
|
|
$
|
97,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans
|
|
$
|
5,016
|
|
|
$
|
31,232
|
|
|
$
|
13,566
|
|
|
$
|
204
|
|
|
|
|
|
|
$
|
32
|
|
|
$
|
9,537
|
|
|
$
|
6,582
|
|
|
$
|
3,399
|
|
|
$
|
69,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
131,684
|
|
|
$
|
878,446
|
|
|
$
|
342,025
|
|
|
$
|
13,557
|
|
|
$
|
3,816
|
|
|
$
|
26,713
|
|
|
$
|
135,528
|
|
|
$
|
18,459
|
|
|
$
|
14,595
|
|
|
$
|
1,564,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
Note 5 Allowance for Loan Losses (continued)
Consumer loans, whether unsecured or secured by real estate, automobiles, or other personal property, are
primarily susceptible to three primary risks; non-payment due to income loss, over-extension of credit and, when the borrower is unable to pay, shortfall in collateral value. Typically non-payment is due to loss of job and will follow general
economic trends in the marketplace driven primarily by rises in the unemployment rate. Loss of collateral value can be due to market demand shifts, damage to collateral itself or a combination of the two.
Problem consumer loans are generally identified by payment history of the borrower (delinquency) or significant changes in the borrowers credit rating.
Current credit scores are obtained for all consumer loans on a quarterly basis, and risk ratings are adjusted appropriately. The Bank manages its consumer loan portfolios by monitoring delinquency and contacting borrowers to encourage repayment,
suggesting modifications if appropriate, and, when continued scheduled payments become unrealistic, initiating repossession or foreclosure through appropriate channels. Collateral values may be determined by appraisals obtained through Bank
approved, licensed appraisers, qualified independent third parties, public value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate valuations are obtained at initiation of the credit and periodically
(every 3-12 months depending on collateral type) once repayment is questionable and the loan has been classified.
Commercial real estate loans generally
fall into two categories, owner-occupied and non-owner occupied. Loans secured by owner occupied real estate are primarily susceptible to changes in the business conditions of the related business. This may be driven by, among other things, industry
changes, geographic business changes, changes in the individual fortunes of the business owner, and general economic conditions and changes in business cycles. These same risks apply to commercial loans whether secured by equipment or other personal
property or unsecured. Losses on loans secured by owner occupied real estate, equipment, or other personal property generally are dictated by the value of underlying collateral at the time of default and liquidation of the collateral. When default
is driven by issues related specifically to the business owner, collateral values tend to provide better repayment support and may result in little or no loss. Alternatively, when default is driven by more general economic conditions, underlying
collateral generally has devalued more and results in larger losses due to default. Loans secured by non-owner occupied real estate are primarily susceptible to risks associated with swings in occupancy or vacancy and related shifts in lease rates,
rental rates or room rates. Most often these shifts are a result of changes in general economic or market conditions or overbuilding and resultant over-supply. Losses are dependent on value of underlying collateral at the time of default. Values are
generally driven by these same factors and influenced by interest rates and required rates of return as well as changes in occupancy costs.
Construction
loans, whether owner occupied or non-owner occupied commercial real estate loans or residential development loans, are not only susceptible to the related risks described above but the added risks of construction itself including cost over-runs,
mismanagement of the project, or lack of demand or market changes experienced at time of completion. Again, losses are primarily related to underlying collateral value and changes therein as described above.
Problem commercial loans are generally identified by periodic review of financial information which may include financial statements, tax returns, rent rolls
and payment history of the borrower (delinquency). Based on this information the Bank may decide to take any of several courses of action including demand for repayment, additional collateral or guarantors, and, when repayment becomes unlikely
through borrowers income and cash flow, repossession or foreclosure of the underlying collateral.
Collateral values may be determined by appraisals
obtained through Bank approved, licensed appraisers, qualified independent third parties, public value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate valuations are obtained at initiation of the
credit and periodically (every 3-12 months depending on collateral type) once repayment is questionable and the loan has been classified.
Once a loan
becomes delinquent and repayment becomes questionable, a Bank collection officer will address collateral shortfalls with the borrower and attempt to obtain additional collateral. If this is not forthcoming and payment in full is unlikely, the Bank
will estimate its probable loss, using a recent valuation as appropriate to the underlying collateral less estimated costs of sale, and charge the loan down to the estimated net realizable amount. Depending on the length of time until ultimate
collection, the Bank may revalue the underlying collateral and take additional charge-offs as warranted. Revaluations may occur as often as every 3-12 months depending on the underlying collateral and volatility of values. Final charge-offs or
recoveries are taken when collateral is liquidated and actual loss is known. Unpaid balances on loans after or during collection and liquidation may also be pursued through lawsuit and attachment of wages or judgment liens on borrowers other
assets.
20
Note 5 Allowance for Loan Losses (continued)
The following table shows the ending balance of current, past due, and nonaccrual originated loans by loan
category as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual Originated Loans As of September 30, 2013
|
|
(In thousands)
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
Originated loan balance:
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59 Days
|
|
$
|
184
|
|
|
$
|
5,323
|
|
|
$
|
3,258
|
|
|
$
|
67
|
|
|
$
|
38
|
|
|
$
|
28
|
|
|
$
|
372
|
|
|
$
|
107
|
|
|
$
|
49
|
|
|
$
|
9,426
|
|
60-89 Days
|
|
|
1,023
|
|
|
|
2,887
|
|
|
|
987
|
|
|
|
90
|
|
|
|
|
|
|
|
2
|
|
|
|
939
|
|
|
|
232
|
|
|
|
198
|
|
|
|
6,358
|
|
> 90 Days
|
|
|
176
|
|
|
|
7,234
|
|
|
|
2,007
|
|
|
|
254
|
|
|
|
40
|
|
|
|
10
|
|
|
|
125
|
|
|
|
19
|
|
|
|
68
|
|
|
|
9,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
|
1,383
|
|
|
|
15,444
|
|
|
|
6,252
|
|
|
|
411
|
|
|
|
78
|
|
|
|
40
|
|
|
|
1,436
|
|
|
|
358
|
|
|
|
315
|
|
|
|
25,717
|
|
Current
|
|
|
127,591
|
|
|
|
786,126
|
|
|
|
315,260
|
|
|
|
12,434
|
|
|
|
1,273
|
|
|
|
26,066
|
|
|
|
124,598
|
|
|
|
26,011
|
|
|
|
13,759
|
|
|
|
1,433,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Originated loans
|
|
$
|
128,974
|
|
|
$
|
801,570
|
|
|
$
|
321,512
|
|
|
$
|
12,845
|
|
|
$
|
1,351
|
|
|
$
|
26,106
|
|
|
$
|
126,034
|
|
|
$
|
26,369
|
|
|
$
|
14,074
|
|
|
$
|
1,458,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
4,353
|
|
|
$
|
38,241
|
|
|
$
|
6,098
|
|
|
$
|
490
|
|
|
$
|
59
|
|
|
$
|
28
|
|
|
$
|
1,152
|
|
|
$
|
2,588
|
|
|
$
|
252
|
|
|
$
|
53,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the ending balance of current, past due, and nonaccrual PNCI loans by loan category as of the date
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual PNCI Loans As of September 30, 2013
|
|
(In thousands)
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
PNCI loan balance:
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59 Days
|
|
|
|
|
|
$
|
514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
514
|
|
60-89 Days
|
|
|
|
|
|
|
1,883
|
|
|
$
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,921
|
|
> 90 Days
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
|
|
|
|
|
2,407
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,445
|
|
Current
|
|
$
|
61,808
|
|
|
|
59,697
|
|
|
|
14,329
|
|
|
$
|
281
|
|
|
|
|
|
|
$
|
2,101
|
|
|
$
|
775
|
|
|
|
|
|
|
|
|
|
|
|
138,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI loans
|
|
$
|
61,808
|
|
|
$
|
62,104
|
|
|
$
|
14,367
|
|
|
$
|
281
|
|
|
|
|
|
|
$
|
2,101
|
|
|
$
|
775
|
|
|
|
|
|
|
|
|
|
|
$
|
141,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
265
|
|
|
$
|
800
|
|
|
$
|
494
|
|
|
|
|
|
|
|
|
|
|
$
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Note 5 Allowance for Loan Losses (continued)
The following table shows the ending balance of current, past due, and nonaccrual originated loans by loan
category as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual Originated Loans As of December 31, 2012
|
|
(In thousands)
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
Originated loan balance:
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59 Days
|
|
$
|
1,702
|
|
|
$
|
2,695
|
|
|
$
|
3,371
|
|
|
$
|
67
|
|
|
$
|
77
|
|
|
$
|
67
|
|
|
$
|
1,848
|
|
|
$
|
309
|
|
|
|
|
|
|
$
|
10,136
|
|
60-89 Days
|
|
|
278
|
|
|
|
1,578
|
|
|
|
819
|
|
|
|
33
|
|
|
|
40
|
|
|
|
40
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
2,926
|
|
> 90 Days
|
|
|
674
|
|
|
|
13,829
|
|
|
|
3,395
|
|
|
|
217
|
|
|
|
79
|
|
|
|
14
|
|
|
|
4,782
|
|
|
|
42
|
|
|
$
|
94
|
|
|
|
23,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
|
2,654
|
|
|
|
18,102
|
|
|
|
7,585
|
|
|
|
317
|
|
|
|
196
|
|
|
|
121
|
|
|
|
6,768
|
|
|
|
351
|
|
|
|
94
|
|
|
|
36,188
|
|
Current
|
|
|
118,601
|
|
|
|
757,022
|
|
|
|
304,086
|
|
|
|
12,694
|
|
|
|
3,620
|
|
|
|
24,142
|
|
|
|
118,354
|
|
|
|
11,526
|
|
|
|
11,102
|
|
|
|
1,361,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Originated loans
|
|
$
|
121,255
|
|
|
$
|
775,124
|
|
|
$
|
311,671
|
|
|
$
|
13,011
|
|
|
$
|
3,816
|
|
|
$
|
24,263
|
|
|
$
|
125,122
|
|
|
$
|
11,877
|
|
|
$
|
11,196
|
|
|
$
|
1,397,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
4,781
|
|
|
$
|
37,220
|
|
|
$
|
8,486
|
|
|
$
|
465
|
|
|
$
|
174
|
|
|
$
|
49
|
|
|
$
|
6,750
|
|
|
$
|
3,312
|
|
|
$
|
532
|
|
|
$
|
61,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the ending balance of current, past due, and nonaccrual PNCI loans by loan category as of the date
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual PNCI Loans As of December 31, 2012
|
|
(In thousands)
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
PNCI loan balance:
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59 Days
|
|
$
|
1,024
|
|
|
$
|
500
|
|
|
$
|
124
|
|
|
|
|
|
|
|
|
|
|
$
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,679
|
|
60-89 Days
|
|
|
|
|
|
|
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
|
|
> 90 Days
|
|
|
43
|
|
|
|
148
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
|
1,067
|
|
|
|
648
|
|
|
|
344
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,090
|
|
Current
|
|
|
4,346
|
|
|
|
71,442
|
|
|
|
16,444
|
|
|
$
|
342
|
|
|
|
|
|
|
|
2,387
|
|
|
$
|
869
|
|
|
|
|
|
|
|
|
|
|
|
95,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI loans
|
|
$
|
5,413
|
|
|
$
|
72,090
|
|
|
$
|
16,788
|
|
|
$
|
342
|
|
|
|
|
|
|
$
|
2,418
|
|
|
$
|
869
|
|
|
|
|
|
|
|
|
|
|
$
|
97,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
113
|
|
|
$
|
1,218
|
|
|
$
|
403
|
|
|
|
|
|
|
|
|
|
|
$
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated and PNCI loans are those where management has concluded that it is probable that the borrower will be
unable to pay all amounts due under the contractual terms.
The following tables show the recorded investment (financial statement balance), unpaid
principal balance, average recorded investment, and interest income recognized for impaired Originated and PNCI loans, segregated by those with no related allowance recorded and those with an allowance recorded for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated Loans As of September 30, 2013
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
4,195
|
|
|
$
|
61,418
|
|
|
$
|
3,938
|
|
|
$
|
442
|
|
|
$
|
61
|
|
|
$
|
19
|
|
|
$
|
1,161
|
|
|
$
|
2,588
|
|
|
$
|
68
|
|
|
$
|
73,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
6,320
|
|
|
$
|
67,314
|
|
|
$
|
7,445
|
|
|
$
|
1,131
|
|
|
$
|
135
|
|
|
$
|
32
|
|
|
$
|
1,182
|
|
|
$
|
7,345
|
|
|
$
|
68
|
|
|
$
|
90,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment
|
|
$
|
3,911
|
|
|
$
|
61,375
|
|
|
$
|
4,543
|
|
|
$
|
415
|
|
|
$
|
120
|
|
|
$
|
19
|
|
|
$
|
2,802
|
|
|
$
|
1,837
|
|
|
$
|
137
|
|
|
$
|
75,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income recognized
|
|
$
|
246
|
|
|
$
|
2,644
|
|
|
$
|
268
|
|
|
$
|
21
|
|
|
$
|
10
|
|
|
$
|
2
|
|
|
$
|
61
|
|
|
$
|
81
|
|
|
$
|
1
|
|
|
$
|
3,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
2,468
|
|
|
$
|
6,990
|
|
|
$
|
3,232
|
|
|
$
|
109
|
|
|
$
|
5
|
|
|
$
|
9
|
|
|
$
|
2,158
|
|
|
$
|
284
|
|
|
$
|
184
|
|
|
$
|
15,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
2,510
|
|
|
$
|
7,670
|
|
|
$
|
3,703
|
|
|
$
|
161
|
|
|
$
|
7
|
|
|
$
|
10
|
|
|
$
|
3,063
|
|
|
$
|
284
|
|
|
$
|
426
|
|
|
$
|
17,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
480
|
|
|
$
|
1,293
|
|
|
$
|
1,350
|
|
|
$
|
49
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
678
|
|
|
$
|
91
|
|
|
$
|
9
|
|
|
$
|
3,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment
|
|
$
|
2,304
|
|
|
$
|
5,568
|
|
|
$
|
3,722
|
|
|
$
|
126
|
|
|
$
|
19
|
|
|
$
|
12
|
|
|
$
|
2,519
|
|
|
$
|
1,438
|
|
|
$
|
242
|
|
|
$
|
15,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income recognized
|
|
$
|
93
|
|
|
$
|
388
|
|
|
$
|
109
|
|
|
$
|
8
|
|
|
|
|
|
|
$
|
1
|
|
|
$
|
155
|
|
|
$
|
14
|
|
|
$
|
16
|
|
|
$
|
784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
Note 5 Allowance for Loan Losses (continued)
The following tables show the recorded investment (financial statement balance), unpaid principal balance,
average recorded investment, and interest income recognized for impaired Originated and PNCI loans, segregated by those with no related allowance recorded and those with an allowance recorded for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired PNCI Loans As of September 30, 2013
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
|
|
|
|
$
|
800
|
|
|
$
|
290
|
|
|
|
|
|
|
|
|
|
|
$
|
38
|
|
|
$
|
14
|
|
|
|
|
|
|
|
|
|
|
$
|
1,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
|
|
|
|
$
|
2,893
|
|
|
$
|
342
|
|
|
|
|
|
|
|
|
|
|
$
|
46
|
|
|
$
|
14
|
|
|
|
|
|
|
|
|
|
|
$
|
3,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment
|
|
|
|
|
|
$
|
1,088
|
|
|
$
|
367
|
|
|
|
|
|
|
|
|
|
|
$
|
30
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
$
|
1,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income recognized
|
|
|
|
|
|
$
|
154
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
350
|
|
|
$
|
165
|
|
|
$
|
204
|
|
|
|
|
|
|
|
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
366
|
|
|
$
|
165
|
|
|
$
|
214
|
|
|
|
|
|
|
|
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
193
|
|
|
$
|
133
|
|
|
$
|
179
|
|
|
|
|
|
|
|
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment
|
|
$
|
276
|
|
|
$
|
292
|
|
|
$
|
121
|
|
|
|
|
|
|
|
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income recognized
|
|
$
|
18
|
|
|
$
|
7
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated Loans As of December 31, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
3,520
|
|
|
$
|
66,031
|
|
|
$
|
4,241
|
|
|
$
|
361
|
|
|
$
|
163
|
|
|
$
|
19
|
|
|
$
|
4,238
|
|
|
$
|
3,554
|
|
|
$
|
284
|
|
|
$
|
82,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
5,349
|
|
|
$
|
70,709
|
|
|
$
|
6,691
|
|
|
$
|
781
|
|
|
$
|
311
|
|
|
$
|
40
|
|
|
$
|
4,613
|
|
|
$
|
8,227
|
|
|
$
|
484
|
|
|
$
|
97,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment
|
|
$
|
6,329
|
|
|
$
|
61,299
|
|
|
$
|
4,311
|
|
|
$
|
329
|
|
|
$
|
263
|
|
|
$
|
42
|
|
|
$
|
7,500
|
|
|
$
|
3,505
|
|
|
$
|
517
|
|
|
$
|
84,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income recognized
|
|
$
|
71
|
|
|
$
|
2,513
|
|
|
$
|
58
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
|
|
|
|
$
|
73
|
|
|
$
|
20
|
|
|
$
|
10
|
|
|
$
|
2,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
2,867
|
|
|
$
|
3,258
|
|
|
$
|
5,412
|
|
|
$
|
167
|
|
|
$
|
34
|
|
|
$
|
30
|
|
|
$
|
4,324
|
|
|
$
|
42
|
|
|
$
|
323
|
|
|
$
|
16,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
3,432
|
|
|
$
|
3,556
|
|
|
$
|
7,103
|
|
|
$
|
396
|
|
|
$
|
51
|
|
|
$
|
32
|
|
|
$
|
4,992
|
|
|
$
|
42
|
|
|
$
|
523
|
|
|
$
|
20,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
603
|
|
|
$
|
352
|
|
|
$
|
2,237
|
|
|
$
|
81
|
|
|
$
|
5
|
|
|
$
|
12
|
|
|
$
|
840
|
|
|
$
|
11
|
|
|
$
|
111
|
|
|
$
|
4,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment
|
|
$
|
3,890
|
|
|
$
|
7,841
|
|
|
$
|
6,331
|
|
|
$
|
317
|
|
|
$
|
102
|
|
|
$
|
49
|
|
|
$
|
2,800
|
|
|
$
|
1,543
|
|
|
$
|
6,570
|
|
|
$
|
29,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income recognized
|
|
$
|
67
|
|
|
$
|
129
|
|
|
$
|
103
|
|
|
$
|
16
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
100
|
|
|
$
|
6
|
|
|
$
|
5
|
|
|
$
|
428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Note 5 Allowance for Loan Losses (continued)
The following tables show the recorded investment (financial statement balance), unpaid principal balance,
average recorded investment, and interest income recognized for impaired PNCI and Originated loans, segregated by those with no related allowance recorded and those with an allowance recorded for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired PNCI Loans As of December 31, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
|
|
|
|
$
|
1,468
|
|
|
$
|
365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
|
|
|
|
$
|
3,452
|
|
|
$
|
586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment
|
|
$
|
16
|
|
|
$
|
2,097
|
|
|
$
|
308
|
|
|
$
|
11
|
|
|
|
|
|
|
$
|
31
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
$
|
2,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income recognized
|
|
|
|
|
|
$
|
133
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
199
|
|
|
$
|
320
|
|
|
$
|
38
|
|
|
|
|
|
|
|
|
|
|
$
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
225
|
|
|
$
|
331
|
|
|
$
|
41
|
|
|
|
|
|
|
|
|
|
|
$
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
28
|
|
|
$
|
163
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
$
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment
|
|
$
|
213
|
|
|
$
|
121
|
|
|
$
|
148
|
|
|
|
|
|
|
|
|
|
|
$
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income recognized
|
|
$
|
9
|
|
|
$
|
12
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated Loans As of September 30, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
5,971
|
|
|
$
|
58,397
|
|
|
$
|
4,262
|
|
|
$
|
390
|
|
|
$
|
207
|
|
|
$
|
32
|
|
|
$
|
6,907
|
|
|
$
|
3,879
|
|
|
$
|
524
|
|
|
$
|
80,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
8,638
|
|
|
$
|
67,181
|
|
|
$
|
7,183
|
|
|
$
|
866
|
|
|
$
|
375
|
|
|
$
|
52
|
|
|
$
|
7,753
|
|
|
$
|
9,010
|
|
|
$
|
864
|
|
|
$
|
101,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
6,857
|
|
|
$
|
60,994
|
|
|
$
|
4,331
|
|
|
$
|
314
|
|
|
$
|
289
|
|
|
$
|
47
|
|
|
$
|
8,143
|
|
|
$
|
3,434
|
|
|
$
|
554
|
|
|
$
|
84,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
41
|
|
|
$
|
1,178
|
|
|
$
|
36
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
|
|
|
|
$
|
43
|
|
|
$
|
19
|
|
|
$
|
8
|
|
|
$
|
1,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
2,895
|
|
|
$
|
7,428
|
|
|
$
|
4,981
|
|
|
$
|
293
|
|
|
$
|
53
|
|
|
$
|
31
|
|
|
$
|
1,789
|
|
|
$
|
247
|
|
|
$
|
6,431
|
|
|
$
|
24,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
3,401
|
|
|
$
|
8,482
|
|
|
$
|
6,712
|
|
|
$
|
555
|
|
|
$
|
74
|
|
|
$
|
33
|
|
|
$
|
1,826
|
|
|
$
|
295
|
|
|
$
|
6,544
|
|
|
$
|
27,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
610
|
|
|
$
|
1,068
|
|
|
$
|
2,009
|
|
|
$
|
174
|
|
|
$
|
9
|
|
|
$
|
8
|
|
|
$
|
773
|
|
|
$
|
40
|
|
|
$
|
550
|
|
|
$
|
5,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
2,934
|
|
|
$
|
6,755
|
|
|
$
|
4,527
|
|
|
$
|
261
|
|
|
$
|
90
|
|
|
$
|
39
|
|
|
$
|
1,359
|
|
|
$
|
1,529
|
|
|
$
|
6,463
|
|
|
$
|
23,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
77
|
|
|
$
|
145
|
|
|
$
|
61
|
|
|
$
|
6
|
|
|
$
|
1
|
|
|
|
|
|
|
$
|
72
|
|
|
$
|
3
|
|
|
$
|
287
|
|
|
$
|
652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Note 5 Allowance for Loan Losses (Continued)
The following tables show the recorded investment (financial statement balance), unpaid principal balance,
average recorded investment, and interest income recognized for impaired PNCI loans, segregated by those with no related allowance recorded and those with an allowance recorded for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired PNCI Loans As of September 30, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consumer
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
63
|
|
|
$
|
2,739
|
|
|
$
|
287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
63
|
|
|
$
|
4,769
|
|
|
$
|
319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
11
|
|
|
$
|
2,095
|
|
|
$
|
302
|
|
|
$
|
15
|
|
|
|
|
|
|
$
|
41
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
$
|
2,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
3
|
|
|
$
|
130
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
356
|
|
|
$
|
323
|
|
|
$
|
416
|
|
|
|
|
|
|
|
|
|
|
$
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
359
|
|
|
$
|
334
|
|
|
$
|
418
|
|
|
|
|
|
|
|
|
|
|
$
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
184
|
|
|
$
|
165
|
|
|
$
|
132
|
|
|
|
|
|
|
|
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
192
|
|
|
$
|
54
|
|
|
$
|
122
|
|
|
|
|
|
|
|
|
|
|
$
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2013, $54,551,000 of Originated loans were TDR and classified as impaired. The Company had obligations
to lend $50,000 of additional funds on these TDR as of September 30, 2013. At September 30, 2013, $928,000 of PNCI loans and $87,000 of PCI loans were TDR and classified as impaired. The Company had no obligations to lend additional funds
on these TDR as of September 30, 2013.
At December 31, 2012, $57,223,000 of Originated loans were TDR and classified as impaired. The Company
had obligations to lend $137,000 of additional funds on these TDR as of December 31, 2012. At December 31, 2012, $950,000 of PNCI loans were TDR and classified as impaired. The Company had no obligations to lend additional funds on these
TDR as of December 31, 2012.
The following table shows certain information regarding Troubled Debt Restructurings (TDRs) that occurred during the
period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR Information for the Three Months Ended September 30, 2013
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Number
|
|
|
4
|
|
|
|
1
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
Pre-modification out-standing principal balance
|
|
$
|
607
|
|
|
$
|
25
|
|
|
$
|
480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
113
|
|
|
|
|
|
|
|
|
|
|
$
|
1,225
|
|
Post-modification out-standing principal balance
|
|
$
|
607
|
|
|
$
|
26
|
|
|
$
|
482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
|
$
|
1,229
|
|
Financial impact due to troubled debt restructure taken as additional provision
|
|
|
|
|
|
$
|
4
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
$
|
61
|
|
Number that defaulted during the period
|
|
|
|
|
|
|
3
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Recorded investment of TDRs that defaulted during the period
|
|
|
|
|
|
$
|
674
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
774
|
|
Financial impact due to the default of previous troubled debt restructure taken as charge-offs or additional provisions
|
|
|
|
|
|
|
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7
|
|
25
Note 5 Allowance for Loan Losses (Continued)
The following tables show certain information regarding TDRs that occurred during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR Information for the Nine Months Ended September 30, 2013
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Number
|
|
|
6
|
|
|
|
7
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
Pre-modification out-standing principal balance
|
|
$
|
1,039
|
|
|
$
|
4,580
|
|
|
$
|
1,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
221
|
|
|
|
|
|
|
|
|
|
|
$
|
6,902
|
|
Post-modification out-standing principal balance
|
|
$
|
1,043
|
|
|
$
|
4,581
|
|
|
$
|
1,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
222
|
|
|
|
|
|
|
|
|
|
|
$
|
6,915
|
|
Financial impact due to troubled debt restructure taken as additional provision
|
|
$
|
151
|
|
|
$
|
26
|
|
|
$
|
220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
88
|
|
|
|
|
|
|
|
|
|
|
$
|
485
|
|
Number that defaulted during the period
|
|
|
2
|
|
|
|
7
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
15
|
|
Recorded investment of TDRs that defaulted during the period
|
|
$
|
181
|
|
|
$
|
1,065
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,297
|
|
|
$
|
73
|
|
|
|
|
|
|
$
|
3,256
|
|
Financial impact due to the default of previous troubled debt restructure taken as charge-offs or additional provisions
|
|
$
|
(3
|
)
|
|
|
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5
|
|
|
|
|
|
|
$
|
9
|
|
|
|
|
|
TDR Information for the Three Months Ended September 30, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(Dollars in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Number
|
|
|
1
|
|
|
|
4
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
10
|
|
Pre-modification out-standing principal balance
|
|
$
|
101
|
|
|
$
|
609
|
|
|
$
|
146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
249
|
|
|
$
|
86
|
|
|
|
|
|
|
$
|
1,191
|
|
Post-modification out-standing principal balance
|
|
$
|
101
|
|
|
$
|
609
|
|
|
$
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
249
|
|
|
$
|
97
|
|
|
|
|
|
|
$
|
1,206
|
|
Financial Impact due to troubled debt restructure taken as additional provision
|
|
|
|
|
|
$
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
158
|
|
|
|
|
|
|
|
|
|
|
$
|
312
|
|
Number that defaulted during the period
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
5
|
|
Recorded investment of TDRs that defaulted during the period
|
|
|
|
|
|
$
|
625
|
|
|
$
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
217
|
|
|
$
|
1,011
|
|
Financial Impact due to the default of previous troubled debt restructure taken as charge-offs or additional provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
Note 5 Allowance for Loan Losses (Continued)
The following table shows certain information regarding TDRs that occurred during the period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR Information for the Nine Months Ended September 30, 2012
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(In thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Number
|
|
|
4
|
|
|
|
14
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
35
|
|
Pre-modification out-standing principal balance
|
|
$
|
822
|
|
|
$
|
3,220
|
|
|
$
|
1,398
|
|
|
|
|
|
|
|
|
|
|
$
|
38
|
|
|
$
|
498
|
|
|
$
|
317
|
|
|
|
|
|
|
$
|
6,293
|
|
Post-modification out-standing principal balance
|
|
$
|
842
|
|
|
$
|
3,182
|
|
|
$
|
1,471
|
|
|
|
|
|
|
|
|
|
|
$
|
38
|
|
|
$
|
498
|
|
|
$
|
328
|
|
|
|
|
|
|
$
|
6,359
|
|
Financial impact due to troubled debt restructure taken as additional provision
|
|
$
|
(11
|
)
|
|
$
|
212
|
|
|
$
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
158
|
|
|
|
|
|
|
|
|
|
|
$
|
419
|
|
Number that defaulted during the period
|
|
|
1
|
|
|
|
8
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
1
|
|
|
|
3
|
|
|
|
19
|
|
Recorded investment of TDRs that defaulted during the period
|
|
$
|
112
|
|
|
$
|
4,303
|
|
|
$
|
443
|
|
|
$
|
46
|
|
|
|
|
|
|
|
|
|
|
$
|
1,124
|
|
|
$
|
97
|
|
|
$
|
256
|
|
|
$
|
6,381
|
|
Financial impact due to the default of previous troubled debt restructure taken as charge-offs or additional provisions
|
|
|
|
|
|
|
|
|
|
$
|
(13
|
)
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
$
|
50
|
|
|
|
|
|
|
|
|
|
|
$
|
36
|
|
Modifications classified as Troubled Debt Restructurings can include one or a combination of the following:
|
|
|
Interest only modifications, either temporary or long-term
|
|
|
|
Collateral substitutions/additions
|
For all new Troubled Debt Restructurings, an impairment analysis is
conducted. If the loan is determined to be collateral dependent, any additional amount of impairment will be calculated based on the difference between estimated collectible value and the current carrying balance of the loan. This difference could
result in an increased provision and is typically charged off. If the asset is determined not to be collateral dependent, the impairment is measured on the net present value difference between the estimated cash flows of the restructured loan and
the cash flows which would have been received under the original terms. The effect of this could result in a requirement for additional provision to the reserve. The effect of these required provisions for the period are indicated above.
Typically if a TDR defaults during the period, the loan is then considered collateral dependent and, if it was not already considered collateral dependent, an
appropriate provision will be reserved or charge will be taken. The additional provisions required resulting from default of previously modified TDRs are noted above.
Note 6 Foreclosed Assets
A summary of the activity in the balance of foreclosed assets follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2013
|
|
|
Nine months ended September 30, 2012
|
|
|
|
Noncovered
|
|
|
Covered
|
|
|
Total
|
|
|
Noncovered
|
|
|
Covered
|
|
|
Total
|
|
Beginning balance, net
|
|
$
|
5,957
|
|
|
$
|
1,541
|
|
|
$
|
7,498
|
|
|
$
|
13,268
|
|
|
$
|
3,064
|
|
|
$
|
16,332
|
|
Additions/transfers from loans
|
|
|
7,542
|
|
|
|
493
|
|
|
|
8,035
|
|
|
|
5,657
|
|
|
|
633
|
|
|
|
6,290
|
|
Dispositions/sales
|
|
|
(10,004
|
)
|
|
|
(769
|
)
|
|
|
10,773
|
)
|
|
|
(10,073
|
)
|
|
|
(844
|
)
|
|
|
(10,917
|
)
|
Valuation adjustments
|
|
|
(539
|
)
|
|
|
(81
|
)
|
|
|
(620
|
)
|
|
|
(1,059
|
)
|
|
|
(461
|
)
|
|
|
(1,520
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, net
|
|
$
|
2,956
|
|
|
$
|
1,184
|
|
|
$
|
4,140
|
|
|
$
|
7,793
|
|
|
$
|
2,392
|
|
|
$
|
10,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending valuation allowance
|
|
$
|
(587
|
)
|
|
$
|
(340
|
)
|
|
$
|
(927
|
)
|
|
$
|
(1,385
|
)
|
|
$
|
(846
|
)
|
|
$
|
(2,231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending number of foreclosed assets
|
|
|
26
|
|
|
|
5
|
|
|
|
31
|
|
|
|
42
|
|
|
|
8
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of foreclosed assets
|
|
$
|
11,383
|
|
|
$
|
869
|
|
|
$
|
12,252
|
|
|
$
|
10,271
|
|
|
$
|
1,010
|
|
|
$
|
11,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sale of foreclosed assets
|
|
$
|
1,379
|
|
|
$
|
100
|
|
|
$
|
1,479
|
|
|
$
|
198
|
|
|
$
|
166
|
|
|
$
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Note 7 - Premises and Equipment
Premises and equipment were comprised of:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In thousands)
|
|
Land & land improvements
|
|
$
|
5,922
|
|
|
$
|
5,929
|
|
Buildings
|
|
|
30,082
|
|
|
|
23,090
|
|
Furniture and equipment
|
|
|
27,590
|
|
|
|
25,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,594
|
|
|
|
54,896
|
|
Less: Accumulated depreciation
|
|
|
(32,393
|
)
|
|
|
(32,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
31,201
|
|
|
|
22,795
|
|
Construction in progress
|
|
|
45
|
|
|
|
4,190
|
|
|
|
|
|
|
|
|
|
|
Total premises and equipment
|
|
$
|
31,246
|
|
|
$
|
26,985
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for premises and equipment amounted to $1,014,000 and $820,000 for the three months ended
September 30, 2013 and 2012, respectively. Depreciation expense for premises and equipment amounted to $2,489,000 and $2,450,000 for the nine months ended September 30, 2013 and 2012, respectively.
Note 8 Cash Value of Life Insurance
A summary of the activity in the balance of cash value of life insurance follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
|
2013
|
|
|
2012
|
|
Beginning balance
|
|
$
|
50,582
|
|
|
$
|
50,403
|
|
Increase in cash value of life insurance
|
|
|
1,337
|
|
|
|
1,350
|
|
Gain on life insurance death benefit
|
|
|
|
|
|
|
600
|
|
Death benefit
|
|
|
|
|
|
|
(1,611
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
51,919
|
|
|
$
|
50,742
|
|
|
|
|
|
|
|
|
|
|
End of period death benefit
|
|
$
|
95,206
|
|
|
$
|
95,132
|
|
Number of policies owned
|
|
|
133
|
|
|
|
136
|
|
Insurance companies used
|
|
|
6
|
|
|
|
6
|
|
Current and former employees and directors covered
|
|
|
36
|
|
|
|
37
|
|
As of September 30, 2013, the Bank was the owner and beneficiary of 133 life insurance policies, issued by six life
insurance companies, covering 36 current and former employees and directors. These life insurance policies are recorded on the Companys financial statements at their reported cash (surrender) values. As a result of current tax law and the
nature of these policies, the Bank records any increase in cash value of these policies as nontaxable noninterest income. If the Bank decided to surrender any of the policies prior to the death of the insured, such surrender may result in a tax
expense related to the life-to-date cumulative increase in cash value of the policy. If the Bank retains such policies until the death of the insured, the Bank would receive nontaxable proceeds from the insurance company equal to the death benefit
of the policies. The Bank has entered into Joint Beneficiary Agreements (JBAs) with certain of the insureds that for certain of the policies provide some level of sharing of the death benefit, less the cash surrender value, among the Bank and the
beneficiaries of the insured upon the receipt of death benefits. See Note 15 of these consolidated financial statements for additional information on of JBAs.
Note 9 - Goodwill and Other Intangible Assets
The following table summarizes the Companys goodwill intangible as of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In thousands)
|
|
2013
|
|
|
Additions
|
|
|
Reductions
|
|
|
2012
|
|
Goodwill
|
|
$
|
15,519
|
|
|
|
|
|
|
|
|
|
|
$
|
15,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the Companys core deposit intangibles as of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In thousands)
|
|
2013
|
|
|
Additions
|
|
|
Reductions
|
|
|
2012
|
|
Core deposit intangibles
|
|
$
|
1,460
|
|
|
|
|
|
|
|
|
|
|
$
|
1,460
|
|
Accumulated amortization
|
|
|
(525
|
)
|
|
|
|
|
|
$
|
(157
|
)
|
|
|
(368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles, net
|
|
$
|
935
|
|
|
|
|
|
|
$
|
(157
|
)
|
|
$
|
1,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Note 9 - Goodwill and Other Intangible Assets (continued)
The Company recorded additions to core deposit intangibles of $898,000 and $562,000 in conjunction with the
Citizens and Granite acquisition on September 23, 2011 and May 28, 2010, respectively. The following table summarizes the Companys estimated core deposit intangible amortization (in thousands):
|
|
|
|
|
|
|
Estimated Core Deposit
|
|
Years Ended
|
|
Intangible Amortization
|
|
2013
|
|
$
|
209
|
|
2014
|
|
|
209
|
|
2015
|
|
|
209
|
|
2016
|
|
|
209
|
|
2017
|
|
|
209
|
|
2018
|
|
|
47
|
|
Note 10 - Mortgage Servicing Rights
The following tables summarize the activity in, and the main assumptions we used to determine the fair value of mortgage servicing rights
for the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Mortgage servicing rights:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
5,571
|
|
|
$
|
4,757
|
|
|
$
|
4,552
|
|
|
$
|
4,603
|
|
Additions
|
|
|
298
|
|
|
|
409
|
|
|
|
1,187
|
|
|
|
1,395
|
|
Change in fair value
|
|
|
180
|
|
|
|
(681
|
)
|
|
|
310
|
|
|
|
(1,513
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
6,049
|
|
|
$
|
4,485
|
|
|
$
|
6,049
|
|
|
$
|
4,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing, late and ancillary fees received
|
|
$
|
428
|
|
|
$
|
389
|
|
|
$
|
1,261
|
|
|
$
|
1,140
|
|
Balance of loans serviced at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
$
|
682,176
|
|
|
$
|
628,674
|
|
|
$
|
666,512
|
|
|
$
|
598,185
|
|
End of period
|
|
$
|
683,910
|
|
|
$
|
642,110
|
|
|
$
|
683,910
|
|
|
$
|
642,110
|
|
Weighted-average prepayment speed (CPR)
|
|
|
|
|
|
|
|
|
|
|
11.0
|
%
|
|
|
20.9
|
%
|
Discount rate
|
|
|
|
|
|
|
|
|
|
|
10.0
|
%
|
|
|
10.0
|
%
|
The changes in fair value of MSRs that occurred during the three and nine months ended September 30, 2013 and 2012 were
mainly due to principal reductions and changes in estimated life of the MSRs.
Note 11 - Indemnification Asset
A summary of the activity in the balance of indemnification asset follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Beginning balance
|
|
$
|
1,441
|
|
|
$
|
4,046
|
|
|
$
|
1,997
|
|
|
$
|
4,405
|
|
Effect of actual covered losses and change in estimated future covered losses
|
|
|
(505
|
)
|
|
|
(87
|
)
|
|
|
(783
|
)
|
|
|
241
|
|
Reimbursable expenses (revenue), net
|
|
|
51
|
|
|
|
2
|
|
|
|
(42
|
)
|
|
|
12
|
|
Payments received
|
|
|
(126
|
)
|
|
|
(1,476
|
)
|
|
|
(311
|
)
|
|
|
(2,173
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
861
|
|
|
$
|
2,485
|
|
|
$
|
861
|
|
|
$
|
2,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 12 Other Assets
Other assets were comprised of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Deferred tax asset, net
|
|
$
|
29,046
|
|
|
$
|
28,935
|
|
Prepaid expense including FDIC assessment and taxes
|
|
|
1,787
|
|
|
|
3,455
|
|
Software
|
|
|
1347
|
|
|
|
1,550
|
|
Life insurance proceeds receivable
|
|
|
|
|
|
|
706
|
|
Advanced compensation
|
|
|
1,253
|
|
|
|
1,440
|
|
TriCo Capital Trust I & II
|
|
|
1,238
|
|
|
|
1,238
|
|
Miscellaneous other assets
|
|
|
568
|
|
|
|
1,283
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
35,239
|
|
|
$
|
38,607
|
|
|
|
|
|
|
|
|
|
|
29
Note 13 - Deposits
A summary of the balances of deposits follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Noninterest-bearing demand
|
|
$
|
656,266
|
|
|
$
|
684,833
|
|
Interest-bearing demand
|
|
|
524,897
|
|
|
|
503,465
|
|
Savings
|
|
|
811,182
|
|
|
|
762,924
|
|
Time certificates, $100,000 and over
|
|
|
163,033
|
|
|
|
180,195
|
|
Other time certificates
|
|
|
137,933
|
|
|
|
158,285
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
2,293,311
|
|
|
$
|
2,289,702
|
|
|
|
|
|
|
|
|
|
|
Certificate of deposit balances of $5,000,000 and $5,000,000 from the State of California were included in time certificates,
$100,000 and over, at September 30, 2013 and December 31, 2012, respectively. The Bank participates in a deposit program offered by the State of California whereby the State may make deposits at the Banks request subject to
collateral and credit worthiness constraints. The negotiated rates on these State deposits are generally more favorable than other wholesale funding sources available to the Bank. Overdrawn deposit balances of $1,255,000 and $1,408,000 were
classified as consumer loans at September 30, 2013 and December 31, 2012, respectively.
Note 14 Reserve for Unfunded Commitments
The following tables summarize the activity in reserve for unfunded commitments for the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Balance at beginning of period
|
|
$
|
3,210
|
|
|
$
|
2,590
|
|
|
$
|
3,615
|
|
|
$
|
2,740
|
|
Provision for losses unfunded commitments
|
|
|
(335
|
)
|
|
|
(35
|
)
|
|
|
(740
|
)
|
|
|
(185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
2,875
|
|
|
$
|
2,555
|
|
|
$
|
2,875
|
|
|
$
|
2,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 15 Other Liabilities
Other liabilities were comprised of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Deferred compensation
|
|
$
|
7,158
|
|
|
$
|
7,738
|
|
Supplemental retirement
|
|
|
17,275
|
|
|
|
16,345
|
|
Joint beneficiary agreements
|
|
|
2,951
|
|
|
|
2,736
|
|
Accrued legal settlement
|
|
|
|
|
|
|
2,090
|
|
Miscellaneous other liabilities
|
|
|
6,283
|
|
|
|
6,213
|
|
|
|
|
|
|
|
|
|
|
Total other liabilities
|
|
$
|
33,667
|
|
|
$
|
35,122
|
|
|
|
|
|
|
|
|
|
|
Note 16 - Other Borrowings
A summary of the balances of other borrowings follows:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
(In thousands)
|
|
2013
|
|
|
2012
|
|
Other collateralized borrowings, fixed rate, as of September 30, 2013 of 0.05% payable on October 1, 2013
|
|
$
|
14,626
|
|
|
$
|
9,197
|
|
|
|
|
|
|
|
|
|
|
Total other borrowings
|
|
$
|
14,626
|
|
|
$
|
9,197
|
|
|
|
|
|
|
|
|
|
|
The Company had $14,626,000 and $9,197,000 of other collateralized borrowings at September 30, 2013 and December 31,
2012, respectively. Other collateralized borrowings are generally overnight maturity borrowings from non-financial institutions that are collateralized by securities owned by the Company. As of September 30, 2013, the Company has pledged as
collateral and sold under agreements to repurchase investment securities with fair value of $19,105,000 under these other collateralized borrowings.
The
Company maintains a collateralized line of credit with the Federal Home Loan Bank of San Francisco. Based on the FHLB stock requirements at September 30, 2013, this line provided for maximum borrowings of $592,200,000 of which none was
outstanding, leaving $592,200,000 available. As of September 30, 2013, the Company has designated loans totaling $1,084,690,000 as potential collateral under this collateralized line of credit with the FHLB.
The Company maintains a collateralized line of credit with the Federal Reserve Bank of San Francisco. As of September 30, 2013, this line provided for
maximum borrowings of $109,408,000 of which none was outstanding, leaving $109,408,000 available. As of September 30, 2013, the Company has designated investment securities with fair value of $50,000 and loans totaling $139,198,000 as potential
collateral under this collateralized line of credit with the FRB.
The Company has available unused correspondent banking lines of credit from commercial
banks totaling $10,000,000 for federal funds transactions at September 30, 2013.
30
Note 17 Junior Subordinated Debt
On July 31, 2003, the Company formed a subsidiary business trust, TriCo Capital Trust I, to issue trust preferred securities.
Concurrently with the issuance of the trust preferred securities, the trust issued 619 shares of common stock to the Company for $1,000 per share or an aggregate of $619,000. In addition, the Company issued a Junior Subordinated Debenture to the
Trust in the amount of $20,619,000. The terms of the Junior Subordinated Debenture are materially consistent with the terms of the trust preferred securities issued by TriCo Capital Trust I. Also on July 31, 2003, TriCo Capital Trust I
completed an offering of 20,000 shares of cumulative trust preferred securities for cash in an aggregate amount of $20,000,000. The trust preferred securities are mandatorily redeemable upon maturity on October 7, 2033 with an interest rate
that resets quarterly at three-month LIBOR plus 3.05%. TriCo Capital Trust I has the right to redeem the trust preferred securities on or after October 7, 2008. The trust preferred securities were issued through an underwriting syndicate to
which the Company paid underwriting fees of $7.50 per trust preferred security or an aggregate of $150,000. The net proceeds of $19,850,000 were used to finance the opening of new branches, improve bank services and technology, repurchase shares of
the Companys common stock under its repurchase plan and increase the Companys capital. The trust preferred securities have not been and will not be registered under the Securities Act of 1933, as amended, or applicable state securities
laws and were sold pursuant to an exemption from registration under the Securities Act of 1933. The trust preferred securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration
requirements of the Securities Act of 1933, as amended, and applicable state securities laws.
The $20,619,000 of junior subordinated debentures issued by
TriCo Capital Trust I are reflected as junior subordinated debt in the consolidated balance sheets. The common stock issued by TriCo Capital Trust I are recorded in other assets in the consolidated balance sheets.
On June 22, 2004, the Company formed a second subsidiary business trust, TriCo Capital Trust II, to issue trust preferred securities. Concurrently with
the issuance of the trust preferred securities, the trust issued 619 shares of common stock to the Company for $1,000 per share or an aggregate of $619,000. In addition, the Company issued a Junior Subordinated Debenture to the Trust in the amount
of $20,619,000. The terms of the Junior Subordinated Debenture are materially consistent with the terms of the trust preferred securities issued by TriCo Capital Trust II. Also on June 22, 2004, TriCo Capital Trust II completed an offering of
20,000 shares of cumulative trust preferred securities for cash in an aggregate amount of $20,000,000. The trust preferred securities are mandatorily redeemable upon maturity on July 23, 2034 with an interest rate that resets quarterly at
three-month LIBOR plus 2.55%. TriCo Capital Trust II has the right to redeem the trust preferred securities on or after July 23, 2009. The trust preferred securities were issued through an underwriting syndicate to which the Company paid
underwriting fees of $2.50 per trust preferred security or an aggregate of $50,000. The net proceeds of $19,950,000 were used to finance the opening of new branches, improve bank services and technology, repurchase shares of the Companys
common stock under its repurchase plan and increase the Companys capital. The trust preferred securities have not been and will not be registered under the Securities Act of 1933, as amended, or applicable state securities laws and were sold
pursuant to an exemption from registration under the Securities Act of 1933. The trust preferred securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the
Securities Act of 1933, as amended, and applicable state securities laws.
The $20,619,000 of junior subordinated debentures issued by TriCo Capital Trust
II are reflected as junior subordinated debt in the consolidated balance sheets. The common stock issued by TriCo Capital Trust II is recorded in other assets in the consolidated balance sheets.
The debentures issued by TriCo Capital Trust I and TriCo Capital Trust II, less the common securities of TriCo Capital Trust I and TriCo Capital Trust II,
continue to qualify as Tier 1 or Tier 2 capital under interim guidance issued by the Board of Governors of the Federal Reserve System (Federal Reserve Board). As of September 30, 2013, the interest rates on the junior subordinated debentures
issued by TriCo Capital Trust I and II were 3.32% and 2.81%, respectively.
Note 18 - Commitments and Contingencies
Restricted Cash Balances
Reserves (in the form of deposits with the Federal Reserve Bank) of $33,755,000 and $31,594,000 were
maintained to satisfy Federal regulatory requirements at September 30, 2013 and December 31, 2012, respectively. These reserves are included in cash and due from banks in the accompanying balance sheets.
Lease Commitments
The Company leases 48 sites under non-cancelable operating leases. The leases contain various provisions for increases in
rental rates, based either on changes in the published Consumer Price Index or a predetermined escalation schedule. Substantially all of the leases provide the Company with the option to extend the lease term one or more times following expiration
of the initial term.
31
Note 18 - Commitments and Contingencies (continued)
At December 31, 2012, future minimum commitments under non-cancelable operating leases with initial or
remaining terms of one year or more are as follows:
|
|
|
|
|
|
|
Operating
|
|
|
|
Leases
|
|
|
|
(In thousands)
|
|
2013
|
|
$
|
2,772
|
|
2014
|
|
|
2,417
|
|
2015
|
|
|
1,536
|
|
2016
|
|
|
954
|
|
2017
|
|
|
617
|
|
Thereafter
|
|
|
1,312
|
|
|
|
|
|
|
Future minimum lease payments
|
|
$
|
9,608
|
|
|
|
|
|
|
Rent expense under operating leases was $1,071,000 and $1,054,000 during the three months ended September 30, 2013 and
2012, respectively. Rent expense under operating leases was $3,257,000 and $3,205,000 during the nine months ended September 30, 2013 and 2012, respectively.
Financial Instruments with Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance sheet risk in the normal
course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and deposit account overdraft privilege. Those instruments involve, to varying degrees,
elements of risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Companys exposure to loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby
letters of credit written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The Companys
exposure to loss in the event of nonperformance by the other party to the financial instrument for deposit account overdraft privilege is represented by the overdraft privilege amount disclosed to the deposit account holder.
The following table presents a summary of the Banks commitments and contingent liabilities:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Financial instruments whose amounts represent risk:
|
|
|
|
|
|
|
|
|
Commitments to extend credit:
|
|
|
|
|
|
|
|
|
Commercial loans
|
|
$
|
119,638
|
|
|
$
|
123,517
|
|
Consumer loans
|
|
|
356,850
|
|
|
|
369,467
|
|
Real estate mortgage loans
|
|
|
31,926
|
|
|
|
27,959
|
|
Real estate construction loans
|
|
|
22,003
|
|
|
|
36,311
|
|
Standby letters of credit
|
|
|
2,013
|
|
|
|
2,905
|
|
Deposit account overdraft privilege
|
|
|
70,424
|
|
|
|
69,675
|
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates of one year or less or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customers credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on Managements credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, residential properties, and income-producing commercial
properties.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support private borrowing arrangements. Most standby letters of credit are issued for one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers. Collateral requirements vary, but in general follow the requirements for other loan facilities.
Deposit account
overdraft privilege amount represents the unused overdraft privilege balance available to the Companys deposit account holders who have deposit accounts covered by an overdraft privilege. The Company has established an overdraft privilege for
certain of its deposit account products whereby all holders of such accounts who bring their accounts to a positive balance at least once every thirty days receive the overdraft privilege. The overdraft privilege allows depositors to overdraft their
deposit account up to a predetermined level. The predetermined overdraft limit is set by the Company based on account type.
32
Note 18 - Commitments and Contingencies (continued)
Legal Proceedings
The Bank owns 10,214 shares of Class B common stock of Visa Inc. which are
convertible into Class A common stock at a conversion ratio of 0.4206 per Class A share. As of September 30, 2013, the value of the Class A shares was $191.10 per share. Utilizing the conversion ratio, the value of
unredeemed Class A equivalent shares owned by the Company was $821,000 as of September 30, 2013, and has not been reflected in the accompanying financial statements. The shares of Visa Class B common stock are restricted and may not be
transferred. Visa Member Banks are required to fund an escrow account to cover settlements, resolution of pending litigation and related claims. If the funds in the escrow account are insufficient to settle all the covered litigation, Visa may sell
additional Class A shares, use the proceeds to settle litigation, and further reduce the conversion ratio. If funds remain in the escrow account after all litigation is settled, the Class B conversion ratio will be increased to reflect that
surplus.
On September 27, 2012, the Company announced that the Bank entered into a tentative settlement with a former employee who filed a class
action lawsuit against the Bank in the Superior Court of California, Kern County on behalf of herself and a putative class of current and former Bank employees serving as assistant branch managers seeking undisclosed damages, alleging that the Bank
improperly classified its assistant branch managers as exempt employees under California laws. The lawsuit alleges claims for: failure to pay overtime compensation; failure to provide meal periods; failure to provide rest periods; failure to provide
accurate wage statements; failure to provide suitable seating; declaratory relief; accounting; and unfair business practices in violation of California Business and Professions Code section 17200. On September 26, 2012, after efforts
to mediate the claim, the Bank and the former employee agreed to settle the case in an amount ranging from $2,039,500 to $2,500,000, depending primarily on the number of class participants who file claims, and pending final approval by the court,
including determination of the method to allocate settlement payments among current and former employees who are members of the defined settlement class, and the portion of the total settlement allocable to attorneys fees and costs to
plaintiffs counsel. On September 26, 2012, the Bank recorded a $2,090,000 expense and accrued liability in anticipation of approval of this settlement by the court and estimated related payroll taxes. On May 7, 2013, the court
preliminariy approved the settlement. On August 27, 2013, the court approved a final settlement agreement for $2,429,000, and the Bank recorded an additional $339,000 expense and accrued liaibility related to this matter. During September 2013,
the Bank paid the settlement amount.
The Company is a defendant in other legal actions arising from normal business activities. Management believes,
after consultation with legal counsel, that these actions are without merit or that the ultimate liability, if any, resulting from them will not materially affect the Companys consolidated financial position or results from operations.
Other Commitments and Contingencies
The Company has entered into employment agreements or change of control agreements with certain officers of
the Company providing severance payments and accelerated vesting of benefits under supplemental retirement agreements to the officers in the event of a change in control of the Company and termination for other than cause or after a substantial and
material change in the officers title, compensation or responsibilities.
Mortgage loans sold to investors may be sold with servicing rights
retained, with only the standard legal representations and warranties regarding recourse to the Bank. Management believes that any liabilities that may result from such recourse provisions are not significant.
Note 19 Shareholders Equity
Dividends Paid
The Bank paid to the
Company cash dividends in the aggregate amounts of $6,080,000 and $6,872,000 during the nine months ended September 30, 2013 and 2012, respectively. The Bank is regulated by the FDIC and the State of California Department of Business Oversight.
Absent approval from the Commissioner of Business Oversight of California, California banking laws generally limit the Banks ability to pay dividends to the lesser of (1) retained earnings or (2) net income for the last three fiscal
years, less cash distributions paid during such period.
Shareholders Rights Plan
On June 25, 2001, the Company announced that its Board of Directors adopted and entered into a Shareholder Rights Plan designed to protect and maximize
shareholder value and to assist the Board of Directors in ensuring fair and equitable benefit to all shareholders in the event of a hostile bid to acquire the Company. On July 8, 2011, the Company amended the Rights Plan to extend its maturity
until July 10, 2021. The Company adopted this Rights Plan to protect shareholders from coercive or otherwise unfair takeover tactics. In general terms, the Rights Plan imposes a significant penalty upon any person or group that acquires 15% or
more of the Companys outstanding common stock without approval of the Companys Board of Directors. The Rights Plan was not adopted in response to any known attempt to acquire control of the Company. Under the Rights Plan, a dividend of
one Preferred Stock Purchase Right was declared for each common share held of record as of the close of business on July 10, 2001. No separate certificates evidencing the rights will be issued unless and until they become exercisable. The
rights generally will not become exercisable unless an acquiring entity accumulates or initiates a tender offer to purchase 15% or more of the Companys common stock. In that event, each right will entitle the holder, other than the unapproved
acquirer and its affiliates, to purchase either the Companys common stock or shares in an acquiring entity at one-half of market value. The rights initial exercise price, which is subject to adjustment, is $49.00 per right. The
Companys Board of Directors generally will be entitled to redeem the rights at a redemption price of $0.01 per right until an acquiring entity acquires a 15% position.
33
Note 19 Shareholders Equity (continued)
Stock Repurchase Plan
On August 21, 2007, the Board of Directors adopted a plan to repurchase, as conditions warrant, up to 500,000 shares of the Companys common stock on
the open market. The timing of purchases and the exact number of shares to be purchased will depend on market conditions. The 500,000 shares authorized for repurchase under this stock repurchase plan represented approximately 3.2% of the
Companys 15,814,662 outstanding common shares as of August 21, 2007. This stock repurchase plan has no expiration date. As of September 30, 2013, the Company had repurchased 166,600 shares under this plan.
Stock Repurchased Under Equity Compensation Plans
During
the nine months ended September 30, 2013, 172,941 shares of the Companys common stock with a market value of $3,490,000 were tendered in lieu of cash to exercise options to purchase shares of the Companys stock and to pay income
taxes related to such exercises as permitted by the Companys shareholder-approved equity compensation plans. The tendered shares were retired. The market value of tendered shares is the last market trade price at closing on the day an option
is exercised. Stock repurchased under equity incentive plans are not counted in the total of stock repurchased under the stock repurchase plan announced August 21, 2007.
Note 20 - Stock Options and Other Equity-Based Incentive Instruments
In March 2009, the Companys Board of Directors adopted the TriCo Bancshares 2009 Equity Incentive Plan (2009 Plan) covering officers,
employees, directors of, and consultants to, the Company. The 2009 Plan was approved by the Companys shareholders in May 2009. The 2009 Plan allows for the granting of the following types of stock awards (Awards): incentive stock
options, nonstatutory stock options, performance awards, restricted stock, restricted stock unit awards and stock appreciation rights. In May 2013, the Companys shareholders approved an amendment to the 2009 Plan increasing the maximum
aggregate number of shares of TriCos common stock which may be issued pursuant to or subject to Awards from 650,000 to 1,650,000. The number of shares available for issuance under the 2009 Plan is reduced by: (i) one share for each share
of common stock issued pursuant to a stock option or a Stock Appreciation Right and (ii) two shares for each share of common stock issued pursuant to a Performance Award, a Restricted Stock Award or a Restricted Stock Unit Award. When Awards
made under the 2009 Plan expire or are forfeited or cancelled, the underlying shares will become available for future Awards under the 2009 Plan. To the extent that a share of common stock pursuant to an Award that counted as two shares against the
number of shares again becomes available for issuance under the 2009 Plan, the number of shares of common stock available for issuance under the 2009 Plan shall increase by two shares. Shares awarded and delivered under the 2009 Plan may be
authorized but unissued, or reacquired shares. As of September 30, 2013, 710,500 options for the purchase of common shares remain outstanding, and 927,500 remain available for grant, under the 2009 Plan.
In May 2001, the Company adopted the TriCo Bancshares 2001 Stock Option Plan (2001 Plan) covering officers, employees, directors of, and consultants to, the
Company. Under the 2001 Plan, the option exercise price cannot be less than the fair market value of the Common Stock at the date of grant except in the case of substitute options. Options for the 2001 Plan expire on the tenth anniversary of the
grant date. Vesting schedules under the 2001 Plan are determined individually for each grant. As of September 30, 2013, 571,170 options for the purchase of common shares remain outstanding under the 2001 Plan. No new options may be granted
under the 2001 Plan.
Stock option activity is summarized in the following table for the time period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average Fair
|
|
|
|
Number
|
|
|
Option Price
|
|
|
Exercise
|
|
|
Value on
|
|
|
|
of Shares
|
|
|
per Share
|
|
|
Price
|
|
|
Date of Grant
|
|
Outstanding at December 31, 2012
|
|
|
1,393,935
|
|
|
$
|
12.60 to $25.91
|
|
|
$
|
17.07
|
|
|
|
|
|
Options granted
|
|
|
144,500
|
|
|
$
|
16.59 to $19.46
|
|
|
$
|
19.31
|
|
|
$
|
8.91
|
|
Options exercised
|
|
|
(248,765
|
)
|
|
$
|
12.60 to $20.58
|
|
|
$
|
13.03
|
|
|
|
|
|
Options forfeited
|
|
|
(8,000
|
)
|
|
$
|
22.54 to $25.91
|
|
|
$
|
24.23
|
|
|
|
|
|
Outstanding at September 30, 2013
|
|
|
1,281,670
|
|
|
$
|
12.63 to $25.91
|
|
|
$
|
18.06
|
|
|
|
|
|
The following table shows the number, weighted-average exercise price, intrinsic value, and weighted average remaining
contractual life of options exercisable, options not yet exercisable and total options outstanding as of September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currently
|
|
|
Currently Not
|
|
|
Total
|
|
|
|
Exercisable
|
|
|
Exercisable
|
|
|
Outstanding
|
|
Number of options
|
|
|
825,570
|
|
|
|
456,100
|
|
|
|
1,281,670
|
|
Weighted average exercise price
|
|
$
|
18.86
|
|
|
$
|
16.63
|
|
|
$
|
18.06
|
|
Intrinsic value (in thousands)
|
|
$
|
3,395
|
|
|
$
|
2,806
|
|
|
$
|
6,201
|
|
Weighted average remaining contractual term (yrs.)
|
|
|
4.0
|
|
|
|
8.5
|
|
|
|
5.6
|
|
The 456,100 options that are currently not exercisable as of September 30, 2013 are expected to vest, on a
weighted-average basis, over the next 3.2 years, and the Company is expected to recognize $2,906,000 of pre-tax compensation costs related to these options as they vest. The Company did not modify any option grants during 2012 or the nine months
ended September 30, 2013.
34
Note 21 - Noninterest Income and Expenses
The components of other noninterest income were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Service charges on deposit accounts
|
|
$
|
3,353
|
|
|
$
|
3,617
|
|
|
$
|
9,770
|
|
|
$
|
10,788
|
|
ATM and interchange fees
|
|
|
2,132
|
|
|
|
1,877
|
|
|
|
6,240
|
|
|
|
5,722
|
|
Other service fees
|
|
|
562
|
|
|
|
567
|
|
|
|
1,683
|
|
|
|
1,740
|
|
Mortgage banking service fees
|
|
|
434
|
|
|
|
403
|
|
|
|
1,280
|
|
|
|
1,154
|
|
Change in value of mortgage servicing rights
|
|
|
181
|
|
|
|
(681
|
)
|
|
|
311
|
|
|
|
(1,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total service charges and fees
|
|
|
6,662
|
|
|
|
5,783
|
|
|
|
19,284
|
|
|
|
17,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of loans
|
|
|
1,083
|
|
|
|
1,430
|
|
|
|
4,967
|
|
|
|
4,317
|
|
Commissions on sale of non-deposit investment products
|
|
|
692
|
|
|
|
803
|
|
|
|
2,294
|
|
|
|
2,464
|
|
Increase in cash value of life insurance
|
|
|
531
|
|
|
|
450
|
|
|
|
1,337
|
|
|
|
1,350
|
|
Change in indemnification asset
|
|
|
(461
|
)
|
|
|
(94
|
)
|
|
|
(876
|
)
|
|
|
215
|
|
Gain on sale of foreclosed assets
|
|
|
313
|
|
|
|
419
|
|
|
|
1,479
|
|
|
|
364
|
|
Sale of customer checks
|
|
|
97
|
|
|
|
90
|
|
|
|
280
|
|
|
|
256
|
|
Lease brokerage income
|
|
|
75
|
|
|
|
80
|
|
|
|
273
|
|
|
|
228
|
|
Gain (loss) on disposal of fixed assets
|
|
|
2
|
|
|
|
(16
|
)
|
|
|
(12
|
)
|
|
|
(404
|
)
|
Commission rebates
|
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
(51
|
)
|
Gain on life insurance death benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600
|
|
Other
|
|
|
133
|
|
|
|
199
|
|
|
|
166
|
|
|
|
740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other noninterest income
|
|
|
2,465
|
|
|
|
3,344
|
|
|
|
10,192
|
|
|
|
10,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
$
|
9,127
|
|
|
$
|
9,127
|
|
|
$
|
29,476
|
|
|
$
|
27,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of noninterest expense were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Base salaries, net of deferred loan origination costs
|
|
$
|
8,716
|
|
|
$
|
8,337
|
|
|
$
|
25,572
|
|
|
$
|
24,769
|
|
Incentive compensation
|
|
|
1,166
|
|
|
|
1,254
|
|
|
|
3,751
|
|
|
|
3,976
|
|
Benefits and other compensation costs
|
|
|
2,979
|
|
|
|
2,771
|
|
|
|
9,389
|
|
|
|
8,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total salaries and benefits expense
|
|
|
12,861
|
|
|
|
12,362
|
|
|
|
38,712
|
|
|
|
37,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
1,925
|
|
|
|
1,851
|
|
|
|
5,337
|
|
|
|
5,424
|
|
Equipment
|
|
|
1,089
|
|
|
|
1,138
|
|
|
|
3,036
|
|
|
|
3,381
|
|
Data processing and software
|
|
|
1,184
|
|
|
|
1,017
|
|
|
|
3,542
|
|
|
|
3,589
|
|
ATM network charges
|
|
|
626
|
|
|
|
529
|
|
|
|
1,801
|
|
|
|
1,628
|
|
Telecommunications
|
|
|
629
|
|
|
|
553
|
|
|
|
1,741
|
|
|
|
1,675
|
|
Postage
|
|
|
269
|
|
|
|
230
|
|
|
|
633
|
|
|
|
704
|
|
Courier service
|
|
|
217
|
|
|
|
270
|
|
|
|
639
|
|
|
|
715
|
|
Advertising
|
|
|
492
|
|
|
|
710
|
|
|
|
1,232
|
|
|
|
2,071
|
|
Assessments
|
|
|
572
|
|
|
|
590
|
|
|
|
1,721
|
|
|
|
1,786
|
|
Operational losses
|
|
|
137
|
|
|
|
171
|
|
|
|
376
|
|
|
|
430
|
|
Professional fees
|
|
|
741
|
|
|
|
832
|
|
|
|
1,885
|
|
|
|
1,946
|
|
Foreclosed assets expense
|
|
|
48
|
|
|
|
284
|
|
|
|
310
|
|
|
|
1,076
|
|
Provision for foreclosed asset losses
|
|
|
47
|
|
|
|
433
|
|
|
|
620
|
|
|
|
1,520
|
|
Change in reserve for unfunded commitments
|
|
|
(335
|
)
|
|
|
(35
|
)
|
|
|
(740
|
)
|
|
|
(185
|
)
|
Intangible amortization
|
|
|
53
|
|
|
|
52
|
|
|
|
157
|
|
|
|
157
|
|
Legal settlement
|
|
|
339
|
|
|
|
2,090
|
|
|
|
339
|
|
|
|
2,090
|
|
Other
|
|
|
2,722
|
|
|
|
2,513
|
|
|
|
7,385
|
|
|
|
7,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other noninterest expense
|
|
|
10,755
|
|
|
|
13,228
|
|
|
|
30,014
|
|
|
|
35,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
$
|
23,616
|
|
|
$
|
25,590
|
|
|
$
|
68,726
|
|
|
$
|
72,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
Note 22 - Income Taxes
The provisions for income taxes applicable to income before taxes differ from amounts computed by applying the statutory Federal income tax rates to income
before taxes. The effective tax rate and the statutory federal income tax rate are reconciled for the periods indicated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Federal statutory income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State income taxes, net of federal tax benefit
|
|
|
6.7
|
%
|
|
|
6.9
|
%
|
|
|
6.7
|
%
|
|
|
6.6
|
%
|
Tax-exempt interest on municipal obligations
|
|
|
(0.5
|
%)
|
|
|
(0.4
|
%)
|
|
|
(0.4
|
%)
|
|
|
(0.5
|
%)
|
Increase in cash value of insurance policies
|
|
|
(1.5
|
%)
|
|
|
(1.8
|
%)
|
|
|
(1.3
|
%)
|
|
|
(2.0
|
%)
|
Other
|
|
|
0.3
|
%
|
|
|
2.2
|
%
|
|
|
0.4
|
%
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate
|
|
|
40.0
|
%
|
|
|
41.9
|
%
|
|
|
40.4
|
%
|
|
|
40.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 23 Earnings Per Share
Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the
period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustments to income that would result from assumed issuance. Potential common
shares that may be issued by the Company relate solely from outstanding stock options, and are determined using the treasury stock method. Earnings per share have been computed based on the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(in thousands)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Net income
|
|
$
|
7,361
|
|
|
$
|
5,020
|
|
|
$
|
22,163
|
|
|
$
|
14,272
|
|
Average number of common shares outstanding
|
|
|
16,074
|
|
|
|
15,993
|
|
|
|
16,035
|
|
|
|
15,989
|
|
Effect of dilutive stock options
|
|
|
156
|
|
|
|
59
|
|
|
|
117
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares outstanding used to calculate diluted earnings per share
|
|
|
16,230
|
|
|
|
16,052
|
|
|
|
16,152
|
|
|
|
16,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options excluded from diluted earnings per share because the effect of these options was antidilutive
|
|
|
171
|
|
|
|
992
|
|
|
|
544
|
|
|
|
967
|
|
Note 24 Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and
liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. The
components of other comprehensive income and related tax effects are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
September, 30
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available-for-sale securities
|
|
$
|
144
|
|
|
$
|
168
|
|
|
$
|
(3,498
|
)
|
|
$
|
(304
|
)
|
Tax effect
|
|
|
(61
|
)
|
|
|
(70
|
)
|
|
|
1,471
|
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available-for-sale securities, net of tax
|
|
$
|
83
|
|
|
$
|
98
|
|
|
$
|
(2,027
|
)
|
|
$
|
(176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive income, included in shareholders equity, are as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(In thousands)
|
|
Net unrealized gains on available-for-sale securities
|
|
$
|
4,936
|
|
|
$
|
8,434
|
|
Tax effect
|
|
|
(2,076
|
)
|
|
|
(3,547
|
)
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains on available-for-sale securities, net of tax
|
|
|
2,860
|
|
|
|
4,887
|
|
|
|
|
|
|
|
|
|
|
Pension liability
|
|
|
(3,806
|
)
|
|
|
(3,806
|
)
|
Tax effect
|
|
|
1,600
|
|
|
|
1,600
|
|
|
|
|
|
|
|
|
|
|
Pension liability, net of tax
|
|
|
(2,206
|
)
|
|
|
(2,206
|
)
|
|
|
|
|
|
|
|
|
|
Joint beneficiary agreement liability
|
|
|
(522
|
)
|
|
|
(522
|
)
|
Tax effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint beneficiary agreement liability, net of tax
|
|
|
(522
|
)
|
|
|
(522
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
$
|
132
|
|
|
$
|
2,159
|
|
|
|
|
|
|
|
|
|
|
36
Note 25 - Retirement Plans
The Company has supplemental retirement plans for current and former directors and key executives. These plans are non-qualified defined
benefit plans and are unsecured and unfunded. The Company has purchased insurance on the lives of the participants and intends (but is not required) to use the cash values of these policies to pay the retirement obligations. The following table sets
forth the net periodic benefit cost recognized for the plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
(In thousands)
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2013
|
|
Net pension cost included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost-benefits earned during the period
|
|
$
|
187
|
|
|
$
|
170
|
|
|
$
|
557
|
|
|
$
|
510
|
|
Interest cost on projected benefit obligation
|
|
|
161
|
|
|
|
172
|
|
|
|
482
|
|
|
|
515
|
|
Amortization of net obligation at transition
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Amortization of prior service cost
|
|
|
39
|
|
|
|
38
|
|
|
|
115
|
|
|
|
115
|
|
Recognized net actuarial loss
|
|
|
73
|
|
|
|
72
|
|
|
|
218
|
|
|
|
216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
460
|
|
|
$
|
452
|
|
|
$
|
1,373
|
|
|
$
|
1,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company contributions to pension plans
|
|
$
|
151
|
|
|
$
|
106
|
|
|
$
|
411
|
|
|
$
|
366
|
|
Pension plan payouts to participants
|
|
$
|
151
|
|
|
$
|
106
|
|
|
$
|
411
|
|
|
$
|
366
|
|
For the year ending December 31, 2013, the Company currently expects to contribute and pay out as benefits $537,000 to
participants under the plans.
Note 26 - Related Party Transactions
Certain directors, officers, and companies with which they are associated were customers of, and had banking transactions with, the Company
or the Bank in the ordinary course of business.
The following table summarizes the activity in these loans for the periods indicated (in thousands):
|
|
|
|
|
Balance December 31, 2011
|
|
$
|
1,764
|
|
Advances/new loans
|
|
|
1,568
|
|
Removed/payments
|
|
|
(964
|
)
|
|
|
|
|
|
Balance December 31, 2012
|
|
$
|
2,368
|
|
Advances/new loans
|
|
|
277
|
|
Removed/payments
|
|
|
(1,071
|
)
|
|
|
|
|
|
Balance September 30, 2013
|
|
$
|
1,574
|
|
|
|
|
|
|
Director Chrysler is a principal owner and CEO of Modern Building Inc. Modern Building Inc. provided construction services to
Tri Counties Bank related to new and existing Bank facilities for aggregate payments of $3,075,000 during the nine months ended September 30, 2013 and $3,924,000 during the year ended December 31, 2012.
Note 27 - Fair Value Measurement
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value
disclosures. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, income approach, and/or the cost approach. Inputs to valuation techniques include the assumptions that market participants
would use in pricing an asset or liability including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance. Securities available-for-sale
and mortgage servicing rights are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for
investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or impairment write-downs of individual assets.
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the
observable nature of the assumptions used to determine fair value. These levels are:
|
|
|
Level 1 -
|
|
Valuation is based upon quoted prices for identical instruments traded in active markets.
|
|
|
Level 2 -
|
|
Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant
assumptions are observable in the market.
|
|
|
Level 3 -
|
|
Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in
pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.
|
37
Note 27 - Fair Value Measurement (continued)
Investment Securities available for sale
Investment securities available for sale are recorded
at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the
present value of future cash flows, adjusted for the securitys credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock
Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and
corporate debt securities. The Company had no securities classified as Level 3 during any of the periods covered in these financial statements.
Loans
held for sale
Loans held for sale are carried at the lower of cost or fair value. The fair value of loans held for sale is based on what secondary markets are currently offering for loans with similar characteristics. As such, we classify
those loans subjected to nonrecurring fair value adjustments as Level 2.
Impaired originated and PNCI loans
Originated and PNCI loans are
not recorded at fair value on a recurring basis. However, from time to time, an originated or PNCI loan is considered impaired and an allowance for loan losses is established. Originated and PNCI loans for which it is probable that payment of
interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. The fair value of an impaired originated or PNCI loan is estimated using one of several methods, including collateral
value, fair value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired originated and PNCI loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral
exceed the recorded investments in such loans. Impaired originated and PNCI loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is
based on an observable market price or a current appraised value which uses substantially observable data, the Company records the impaired originated or PNCI loan as nonrecurring Level 2. When an appraised value is not available or management
determines the fair value of the collateral is further impaired below the appraised value, or the appraised value contains a significant unobservable assumption, such as deviations from comparable sales, and there is no observable market price, the
Company records the impaired originated or PNCI loan as nonrecurring Level 3.
Foreclosed assets
- Foreclosed assets include assets acquired
through, or in lieu of, loan foreclosure. Foreclosed assets are held for sale and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, management periodically performs valuations
and the assets are carried at the lower of carrying amount or fair value less cost to sell. When the fair value of foreclosed assets is based on an observable market price or a current appraised value which uses substantially observable data, the
Company records the impaired originated loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value, or the appraised value contains a
significant unobservable assumption, such as deviations from comparable sales, and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3. Revenue and expenses from operations and changes in the
valuation allowance are included in other noninterest expense.
Mortgage servicing rights
- Mortgage servicing rights are carried at fair value. A
valuation model, which utilizes a discounted cash flow analysis using a discount rate and prepayment speed assumptions is used in the computation of the fair value measurement. While the prepayment speed assumption is currently quoted for comparable
instruments, the discount rate assumption currently requires a significant degree of management judgment and is therefore considered an unobservable input. As such, the Company classifies mortgage servicing rights subjected to recurring fair value
adjustments as Level 3. Additional information regarding mortgage servicing rights can be found in Note 10 in these consolidated financial statements.
38
Note 27 - Fair Value Measurement (continued)
The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring
basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at September 30, 2013
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
105,401
|
|
|
|
|
|
|
$
|
105,401
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
|
7,905
|
|
|
|
|
|
|
|
7,905
|
|
|
|
|
|
Corporate debt securities
|
|
|
1,909
|
|
|
|
|
|
|
|
1,909
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
6,049
|
|
|
|
|
|
|
|
|
|
|
$
|
6,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
121,264
|
|
|
|
|
|
|
$
|
115,215
|
|
|
$
|
6,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at December 31, 2012
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
151,701
|
|
|
|
|
|
|
$
|
151,701
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
|
9,421
|
|
|
|
|
|
|
|
9,421
|
|
|
|
|
|
Corporate debt securities
|
|
|
1,905
|
|
|
|
|
|
|
|
1,905
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
4,552
|
|
|
|
|
|
|
|
|
|
|
$
|
4,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
167,579
|
|
|
|
|
|
|
$
|
163,027
|
|
|
$
|
4,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that
caused the transfer, which generally corresponds with the Companys quarterly valuation process. There were no transfers between any levels during the nine months ended September 30, 2013 or the year ended December 31, 2012.
The following tables provide a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring
basis during the three and nine months ended September 30, 2013 and 2012. Had there been any transfer into or out of Level 3 during 2013 or 2012, the amount included in the Transfers into (out of) Level 3 column would represent the
beginning balance of an item in the period (interim quarter) during which it was transferred (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
Transfers
|
|
|
Included
|
|
|
|
|
|
Ending
|
|
Three months ended September 30,
|
|
Balance
|
|
|
into Level 3
|
|
|
in Earnings
|
|
|
Issuances
|
|
|
Balance
|
|
2013: Mortgage servicing rights
|
|
$
|
5,571
|
|
|
|
|
|
|
$
|
180
|
|
|
$
|
298
|
|
|
$
|
6,049
|
|
2012: Mortgage servicing rights
|
|
$
|
4,757
|
|
|
|
|
|
|
$
|
(681
|
)
|
|
$
|
409
|
|
|
$
|
4,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
Transfers
|
|
|
Included
|
|
|
|
|
|
Ending
|
|
Nine months ended September 30,
|
|
Balance
|
|
|
into Level 3
|
|
|
in Earnings
|
|
|
Issuances
|
|
|
Balance
|
|
2013: Mortgage servicing rights
|
|
$
|
4,552
|
|
|
|
|
|
|
$
|
310
|
|
|
$
|
1,187
|
|
|
$
|
6,049
|
|
2012: Mortgage servicing rights
|
|
$
|
4,603
|
|
|
|
|
|
|
$
|
(1,513
|
)
|
|
$
|
1,395
|
|
|
$
|
4,485
|
|
The Companys method for determining the fair value of mortgage servicing rights is described in Note 1. The key
unobservable inputs used in determining the fair value of mortgage servicing rights are mortgage prepayment speeds and the discount rate used to discount cash projected cash flows. Generally, any significant increases in the mortgage prepayment
speed and discount rate utilized in the fair value measurement of the mortgage servicing rights will result in a negative fair value adjustments (and decrease in the fair value measurement). Conversely, a decrease in the mortgage prepayment speed
and discount rate will result in a positive fair value adjustment (and increase in the fair value measurement). Note 10 contains additional information regarding mortgage servicing rights.
The following table presents quantitative information about recurring Level 3 fair value measurements at September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Valuation
|
|
|
Unobservable
|
|
Range,
|
|
|
|
(in thousands)
|
|
|
Technique
|
|
|
Inputs
|
|
Weighted Average
|
|
Mortgage Servicing Rights
|
|
$
|
6,049
|
|
|
|
Discounted cash flow
|
|
|
Constant prepayment rate
|
|
|
6.9% - 33.0%, 11.0%
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
10.0% - 10.0%, 10.0%
|
|
39
Note 27 - Fair Value Measurement (continued)
The tables below present the recorded amount of assets and liabilities measured at fair value on a
nonrecurring basis, as of the dates indicated, that had a write-down or an additional allowance provided during the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated & PNCI loans
|
|
$
|
22,638
|
|
|
|
|
|
|
|
|
|
|
$
|
22,638
|
|
Foreclosed assets
|
|
|
2,049
|
|
|
|
|
|
|
|
|
|
|
|
2,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
24,687
|
|
|
|
|
|
|
|
|
|
|
$
|
24,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated & PNCI loans
|
|
$
|
18,241
|
|
|
|
|
|
|
|
|
|
|
$
|
18,241
|
|
Foreclosed assets
|
|
|
10,185
|
|
|
|
|
|
|
|
|
|
|
|
10,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
28,426
|
|
|
|
|
|
|
|
|
|
|
$
|
28,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the losses resulting from nonrecurring fair value adjustments that occurred in the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(in thousands)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Impaired Originated & PNCI loans
|
|
$
|
258
|
|
|
$
|
655
|
|
|
$
|
2,836
|
|
|
$
|
1,317
|
|
Foreclosed assets
|
|
|
|
|
|
|
433
|
|
|
|
531
|
|
|
|
1,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loss from nonrecurring fair value adjustments
|
|
$
|
258
|
|
|
$
|
1,088
|
|
|
$
|
3,367
|
|
|
$
|
2,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The impaired Originated and PNCI loan amount above represents impaired, collateral dependent loans that have been adjusted to
fair value. When we identify a collateral dependent loan as impaired, we measure the impairment using the current fair value of the collateral, less selling costs. Depending on the characteristics of a loan, the fair value of collateral is
generally estimated by obtaining external appraisals. If we determine that the value of the impaired loan is less than the recorded investment in the loan, we recognize this impairment and adjust the carrying value of the loan to fair value
through the allowance for loan and lease losses. The loss represents charge-offs or impairments on collateral dependent loans for fair value adjustments based on the fair value of collateral. The carrying value of loans fully charged-off is
zero.
The foreclosed assets amount above represents impaired real estate that has been adjusted to fair value. Foreclosed assets represent real
estate which the Bank has taken control of in partial or full satisfaction of loans. At the time of foreclosure, other real estate owned is recorded at the lower of the carrying amount of the loan or fair value less costs to sell, which becomes the
propertys new basis. Any write-downs based on the assets fair value at the date of acquisition are charged to the allowance for loan and lease losses. After foreclosure, management periodically performs valuations such that the real
estate is carried at the lower of its new cost basis or fair value, net of estimated costs to sell. Fair value adjustments on other real estate owned are recognized within net loss on real estate owned. The loss represents impairments on non-covered
other real estate owned for fair value adjustments based on the fair value of the real estate.
The Companys property appraisals are primarily based
on the sales comparison approach and income approach methodologies, which consider recent sales of comparable properties, including their income generating characteristics, and then make adjustments to reflect the general assumptions that a market
participant would make when analyzing the property for purchase. These adjustments may increase or decrease an appraised value and can vary significantly depending on the location, physical characteristics and income producing potential of each
property. Additionally, the quality and volume of market information available at the time of the appraisal can vary from period to period and cause significant changes to the nature and magnitude of comparable sale adjustments. Given these
variations, comparable sale adjustments are generally not a reliable indicator for how fair value will increase or decrease from period to period. Under certain circumstances, management discounts are applied based on specific characteristics of an
individual property.
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at
fair value on a nonrecurring basis at September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Valuation
|
|
Unobservable
|
|
Range,
|
|
|
|
(in thousands)
|
|
|
Technique
|
|
Inputs
|
|
Weighted Average
|
|
Impaired Originated & PNCI Loans
|
|
$
|
22,638
|
|
|
Sales comparison
approach Income
approach
|
|
Adjustment for differences
between comparable sales
Capitalization rate
|
|
|
5.0% - 41.0%, 9.33%
6.7% - 9.00%, 8.99%
|
|
Foreclosed assets
|
|
$
|
2,049
|
|
|
Sales comparison
approach
|
|
Adjustment for differences
between comparable sales
|
|
|
5.0% - 5.0%, 5.0%
|
|
40
Note 27 - Fair Value Measurement (continued)
In addition to the methods and assumptions used to estimate the fair value of each class of financial
instrument noted above, the following methods and assumptions were used to estimate the fair value of other classes of financial instruments for which it is practical to estimate the fair value.
Short-term Instruments
- Cash and due from banks, fed funds purchased and sold, interest receivable and payable, and short-term borrowings are
considered short-term instruments. For these short-term instruments their carrying amount approximates their fair value.
Restricted Equity
Securities
- The carrying value of restricted equity securities approximates fair value as the shares can only be redeemed by the issuing institution at par.
Originated and PNCI loans
- The fair value of variable rate originated and PNCI loans is the current carrying value. The interest rates on these
originated and PNCI loans are regularly adjusted to market rates. The fair value of other types of fixed rate originated and PNCI loans is estimated by discounting the future cash flows using current rates at which similar loans would be made to
borrowers with similar credit ratings for the same remaining maturities. The allowance for loan losses is a reasonable estimate of the valuation allowance needed to adjust computed fair values for credit quality of certain originated and PNCI loans
in the portfolio.
PCI Loans
- PCI loans are measured at estimated fair value on the date of acquisition. Carrying value is calculated as the
present value of expected cash flows and approximates fair value.
FDIC Indemnification Asset -
The fair value of the FDIC indemnification asset is
based on the discounted value of expected future cash flows under the loss-share agreement.
Deposit Liabilities
- The fair value of demand
deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. These values do not consider the estimated fair value of the Companys core deposit intangible, which is a significant
unrecognized asset of the Company. The fair value of time deposits and other borrowings is based on the discounted value of contractual cash flows.
Other Borrowings
- The fair value of other borrowings is calculated based on the discounted value of the contractual cash flows using current rates at
which such borrowings can currently be obtained.
Junior Subordinated Debentures
- The fair value of junior subordinated debentures is estimated
using a discounted cash flow model. The future cash flows of these instruments are extended to the next available redemption date or maturity date as appropriate based upon the spreads of recent issuances or quotes from brokers for comparable bank
holding companies compared to the contractual spread of each junior subordinated debenture measured at fair value.
Commitments to Extend Credit and
Standby Letters of Credit
- The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present credit worthiness of the counter
parties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on
the estimated cost to terminate them or otherwise settle the obligation with the counter parties at the reporting date.
Fair values for financial
instruments are managements estimates of the values at which the instruments could be exchanged in a transaction between willing parties. These estimates are subjective and may vary significantly from amounts that would be realized in actual
transactions. In addition, other significant assets are not considered financial assets including, any mortgage banking operations, deferred tax assets, and premises and equipment. Further, the tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on the fair value estimates and have not been considered in any of these estimates.
41
Note 27 - Fair Value Measurement (continued)
The estimated fair values of financial instruments that are reported at amortized cost in the
Corporations consolidated balance sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
December 31, 2012
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
69,173
|
|
|
$
|
69,173
|
|
|
$
|
81,086
|
|
|
$
|
81,086
|
|
Cash at Federal Reserve and other banks
|
|
|
471,977
|
|
|
|
471,977
|
|
|
|
667,813
|
|
|
|
667,813
|
|
Level 2 inputs:471,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted equity securities
|
|
|
9,163
|
|
|
|
9,163
|
|
|
|
9,647
|
|
|
|
9,647
|
|
Loans held for sale
|
|
|
3,247
|
|
|
|
3,247
|
|
|
|
12,053
|
|
|
|
12,053
|
|
Accrued interest receivable
|
|
|
6,450
|
|
|
|
6,450
|
|
|
|
6,636
|
|
|
|
6,636
|
|
Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
|
1,617,711
|
|
|
|
1,714,658
|
|
|
|
1,522,175
|
|
|
|
1,607,044
|
|
Indemnification asset
|
|
|
861
|
|
|
|
861
|
|
|
|
1,997
|
|
|
|
1,997
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
2,293,311
|
|
|
|
2,294,425
|
|
|
|
2,289,702
|
|
|
|
2,291,841
|
|
Accrued interest payable
|
|
|
937
|
|
|
|
937
|
|
|
|
1,036
|
|
|
|
1,036
|
|
Other borrowings
|
|
|
14,626
|
|
|
|
14,626
|
|
|
|
9,197
|
|
|
|
9,197
|
|
Junior subordinated debt
|
|
|
41,238
|
|
|
|
25,980
|
|
|
|
41,238
|
|
|
|
28,042
|
|
|
|
|
|
|
|
|
Contract
|
|
|
Fair
|
|
|
Contract
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
Off-balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
$
|
530,417
|
|
|
$
|
5,304
|
|
|
$
|
557,254
|
|
|
$
|
5,573
|
|
Standby letters of credit
|
|
|
2,013
|
|
|
|
20
|
|
|
|
2,905
|
|
|
|
29
|
|
Overdraft privilege commitments
|
|
|
70,424
|
|
|
|
704
|
|
|
|
69,675
|
|
|
|
697
|
|
42
Note 28 - TriCo Bancshares Condensed Financial Statements (Parent Only)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Balance Sheets
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash equivalents
|
|
|
|
|
|
|
|
|
|
$
|
2,489
|
|
|
$
|
2,511
|
|
Investment in Tri Counties Bank
|
|
|
|
|
|
|
|
|
|
|
283,228
|
|
|
|
267,118
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
1,238
|
|
|
|
1,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
$
|
286,955
|
|
|
$
|
270,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
|
$
|
265
|
|
|
$
|
270
|
|
Junior subordinated debt
|
|
|
|
|
|
|
|
|
|
|
41,238
|
|
|
|
41,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
|
|
|
|
41,503
|
|
|
|
41,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, no par value: authorized 50,000,000 shares; issued and outstanding 16,076,662 and 16,000,838 shares,
respectively
|
|
|
|
89,054
|
|
|
|
85,561
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
|
|
156,266
|
|
|
|
141,639
|
|
Accumulated other comprehensive loss, net
|
|
|
|
|
|
|
|
|
|
|
132
|
|
|
|
2,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
|
|
|
|
|
|
|
|
245,452
|
|
|
|
229,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
|
$
|
286,955
|
|
|
$
|
270,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Income
|
|
Three months ended Sept. 30,
|
|
|
Nine months ended Sept. 30,
|
|
(In thousands)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Interest expense
|
|
$
|
314
|
|
|
$
|
333
|
|
|
$
|
936
|
|
|
$
|
1,003
|
|
Administration expense
|
|
|
191
|
|
|
|
131
|
|
|
|
568
|
|
|
|
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before equity in net income of Tri Counties Bank
|
|
|
(505
|
)
|
|
|
(464
|
)
|
|
|
(1,504
|
)
|
|
|
(1,448
|
)
|
Equity in net income of Tri Counties Bank:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributed
|
|
|
2,300
|
|
|
|
1,550
|
|
|
|
6,080
|
|
|
|
6,872
|
|
(Over) under distributed
|
|
|
5,354
|
|
|
|
3,739
|
|
|
|
16,955
|
|
|
|
8,244
|
|
Income tax benefit
|
|
|
212
|
|
|
|
195
|
|
|
|
632
|
|
|
|
604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
7,361
|
|
|
$
|
5,020
|
|
|
$
|
22,163
|
|
|
$
|
14,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Comprehensive Income
|
|
Three months ended Sept. 30,
|
|
|
Nine months ended Sept. 30,
|
|
(In thousands)
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Net income
|
|
$
|
7,361
|
|
|
$
|
5,020
|
|
|
$
|
22,163
|
|
|
$
|
14,272
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on securities arising during the period
|
|
|
83
|
|
|
|
98
|
|
|
|
(2,027
|
)
|
|
|
(176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
83
|
|
|
|
98
|
|
|
|
(2,027
|
)
|
|
|
(176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
7,444
|
|
|
$
|
5,118
|
|
|
$
|
20,136
|
|
|
$
|
14,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Cash Flows
|
|
|
|
|
|
|
|
Nine months ended Sept. 30,
|
|
(In thousands)
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
22,163
|
|
|
$
|
14,272
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over (under) distributed equity in earnings of Tri Counties Bank
|
|
|
|
(16,955
|
)
|
|
|
(8,244
|
)
|
Stock option vesting expense
|
|
|
|
|
|
|
|
|
|
|
849
|
|
|
|
800
|
|
Stock option excess tax benefits
|
|
|
|
|
|
|
|
|
|
|
(356
|
)
|
|
|
(21
|
)
|
Net change in other assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
(853
|
)
|
|
|
(747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
4,848
|
|
|
|
6,060
|
|
Investing activities: None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock through option exercise
|
|
|
|
|
|
|
|
|
|
|
356
|
|
|
|
156
|
|
Stock option excess tax benefits
|
|
|
|
|
|
|
|
|
|
|
251
|
|
|
|
21
|
|
Repurchase of common stock
|
|
|
|
|
|
|
|
|
|
|
(501
|
)
|
|
|
(48
|
)
|
Cash dividends paid common
|
|
|
|
|
|
|
|
|
|
|
(4,976
|
)
|
|
|
(4,317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for financing activities
|
|
|
|
|
|
|
|
|
|
|
(4,870
|
)
|
|
|
(4,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
1,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
|
|
|
|
|
|
|
|
2,511
|
|
|
|
706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
|
|
|
|
|
|
|
|
$
|
2,489
|
|
|
$
|
2,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
Note 29 - Regulatory Matters
The Company is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Companys consolidated financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Companys assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Companys capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes, as of September 30, 2013, that the Company meets all capital adequacy requirements to which it is subject.
As of September 30, 2013, the Banks regulatory capital ratios exceeded the minimums for the Bank to be considered well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. The Banks actual capital
amounts and ratios are also presented in the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum to be Well
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized Under
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
Prompt Corrective
|
|
|
|
Actual
|
|
|
Capital Requirement
|
|
|
Action Provisions
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
(dollars in thousands)
|
|
As of September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
293,093
|
|
|
|
14.88
|
%
|
|
$
|
157,533
|
|
|
|
8.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
290,852
|
|
|
|
14.78
|
%
|
|
$
|
157,432
|
|
|
|
8.0
|
%
|
|
$
|
196,916
|
|
|
|
10.0
|
%
|
Tier 1 Capital (to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
268,261
|
|
|
|
13.62
|
%
|
|
$
|
78,766
|
|
|
|
4.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
266,036
|
|
|
|
13.52
|
%
|
|
$
|
78,716
|
|
|
|
4.0
|
%
|
|
$
|
118,149
|
|
|
|
6.0
|
%
|
Tier 1 Capital (to Average Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
268,261
|
|
|
|
10.37
|
%
|
|
$
|
103,447
|
|
|
|
4.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
266,036
|
|
|
|
10.29
|
%
|
|
$
|
103,395
|
|
|
|
4.0
|
%
|
|
$
|
129,309
|
|
|
|
5.0
|
%
|
As of December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
273,979
|
|
|
|
14.53
|
%
|
|
$
|
150,896
|
|
|
|
8.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
271,723
|
|
|
|
14.42
|
%
|
|
$
|
150,796
|
|
|
|
8.0
|
%
|
|
$
|
188,495
|
|
|
|
10.0
|
%
|
Tier 1 Capital (to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
250,133
|
|
|
|
13.27
|
%
|
|
$
|
75,448
|
|
|
|
4.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
247,892
|
|
|
|
13.16
|
%
|
|
$
|
75,398
|
|
|
|
4.0
|
%
|
|
$
|
113,097
|
|
|
|
6.0
|
%
|
Tier 1 Capital (to Average Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
250,133
|
|
|
|
9.82
|
%
|
|
$
|
101,918
|
|
|
|
4.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
247,892
|
|
|
|
9.73
|
%
|
|
$
|
101,866
|
|
|
|
4.0
|
%
|
|
$
|
127,333
|
|
|
|
5.0
|
%
|
44
Note 30 - Summary of Quarterly Results of Operations (unaudited)
The following table sets forth the results of operations for the quarters of 2013 and 2012, and is unaudited; however, in the opinion of
Management, it reflects all adjustments (which include only normal recurring adjustments) necessary to present fairly the summarized results for such periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 Quarters Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
(In thousands, except per share data)
|
|
Interest and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount accretion PCI cash basis
|
|
|
|
|
|
$
|
140
|
|
|
$
|
129
|
|
|
$
|
167
|
|
Discount accretion PCI other
|
|
|
|
|
|
|
898
|
|
|
|
732
|
|
|
|
597
|
|
Discount accretion PNCI
|
|
|
|
|
|
|
1,115
|
|
|
|
815
|
|
|
|
766
|
|
All other loan interest income
|
|
|
|
|
|
|
22,970
|
|
|
|
22,207
|
|
|
|
22,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan interest income
|
|
|
|
|
|
|
25,123
|
|
|
|
23,883
|
|
|
|
24,072
|
|
Debt securities, dividends and interest bearing cash at Banks (not FTE)
|
|
|
|
|
|
|
2,413
|
|
|
|
1,873
|
|
|
|
1,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
|
|
|
|
27,536
|
|
|
|
25,756
|
|
|
|
25,806
|
|
Interest expense
|
|
|
|
|
|
|
1,169
|
|
|
|
1,167
|
|
|
|
1,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
|
26,367
|
|
|
|
24,589
|
|
|
|
24,569
|
|
Reversal of provision for loan losses
|
|
|
|
|
|
|
(393
|
)
|
|
|
614
|
|
|
|
(1,108
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
|
|
|
|
26,760
|
|
|
|
23,975
|
|
|
|
25,677
|
|
Noninterest income
|
|
|
|
|
|
|
9,127
|
|
|
|
10,131
|
|
|
|
10,218
|
|
Noninterest expense
|
|
|
|
|
|
|
23,616
|
|
|
|
23,509
|
|
|
|
21,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
12,271
|
|
|
|
10,597
|
|
|
|
14,294
|
|
Income tax expense
|
|
|
|
|
|
|
4,910
|
|
|
|
4,272
|
|
|
|
5,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
$
|
7,361
|
|
|
$
|
6,325
|
|
|
$
|
8,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (diluted)
|
|
|
|
|
|
$
|
0.45
|
|
|
$
|
0.39
|
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
|
|
$
|
0.11
|
|
|
$
|
0.11
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 Quarters Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
(In thousands, except per share data)
|
|
Interest and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount accretion PCI cash basis
|
|
$
|
42
|
|
|
$
|
24
|
|
|
$
|
108
|
|
|
$
|
18
|
|
Discount accretion PCI other
|
|
|
979
|
|
|
|
1,192
|
|
|
|
886
|
|
|
|
776
|
|
Discount accretion PNCI
|
|
|
841
|
|
|
|
591
|
|
|
|
1,391
|
|
|
|
1,286
|
|
All other loan interest income
|
|
|
22,383
|
|
|
|
23,723
|
|
|
|
23,407
|
|
|
|
22,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan interest income
|
|
|
24,245
|
|
|
|
25,530
|
|
|
|
25,792
|
|
|
|
24,929
|
|
Debt securities, dividends and interest bearing cash at Banks (not FTE)
|
|
|
1,898
|
|
|
|
1,935
|
|
|
|
2,152
|
|
|
|
2,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
26,143
|
|
|
|
27,465
|
|
|
|
27,944
|
|
|
|
27,164
|
|
Interest expense
|
|
|
1,372
|
|
|
|
1,834
|
|
|
|
2,010
|
|
|
|
2,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
24,771
|
|
|
|
25,631
|
|
|
|
25,934
|
|
|
|
25,036
|
|
Provision for loan losses
|
|
|
1,524
|
|
|
|
532
|
|
|
|
3,371
|
|
|
|
3,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
23,247
|
|
|
|
25,099
|
|
|
|
22,563
|
|
|
|
21,040
|
|
Noninterest income
|
|
|
10,011
|
|
|
|
9,127
|
|
|
|
10,577
|
|
|
|
8,265
|
|
Noninterest expense
|
|
|
25,126
|
|
|
|
25,590
|
|
|
|
24,367
|
|
|
|
22,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
8,132
|
|
|
|
8,636
|
|
|
|
8,773
|
|
|
|
6,390
|
|
Income tax expense
|
|
|
3,410
|
|
|
|
3,616
|
|
|
|
3,452
|
|
|
|
2,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,722
|
|
|
$
|
5,020
|
|
|
$
|
5,321
|
|
|
$
|
3,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (diluted)
|
|
$
|
0.29
|
|
|
$
|
0.31
|
|
|
$
|
0.33
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45