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Loans and Leases

3 Months Ended

Mar. 31, 2016

Loans and Leases Receivable Disclosure [Abstract]

5. Loans and Leases

Loans and Leases at March 31, 2016 and December 31, 2015 were as follows:

	03/31/2016								12/31/2015
(in thousands)	Originated			Acquired		Total Loans and Leases			Originated			Acquired		Total Loans and Leases
Commercial and industrial
Agriculture	$	74,890		$	0	$	74,890		$	88,299		$	0	$	88,299
Commercial and industrial other		769,047			86,542		855,589			768,024			84,810		852,834
Subtotal commercial and industrial		843,937			86,542		930,479			856,323			84,810		941,133
Commercial real estate
Construction		115,584			2,109		117,693			103,037			4,892		107,929
Agriculture		94,300			2,013		96,313			86,935			2,095		89,030
Commercial real estate other		1,214,190			278,023		1,492,213			1,167,250			284,952		1,452,202
Subtotal commercial real estate		1,424,074			282,145		1,706,219			1,357,222			291,939		1,649,161
Residential real estate
Home equity		199,245			40,842		240,087			202,578			42,092		244,670
Mortgages		834,298			26,871		861,169			823,841			27,491		851,332
Subtotal residential real estate		1,033,543			67,713		1,101,256			1,026,419			69,583		1,096,002
Consumer and other
Indirect		17,714			0		17,714			17,829			0		17,829
Consumer and other		40,002			985		40,987			40,904			911		41,815
Subtotal consumer and other		57,716			985		58,701			58,733			911		59,644
Leases		14,426			0		14,426			14,861			0		14,861
Covered loans		0			12,737		12,737			0			14,031		14,031
Total loans and leases		3,373,696			450,122		3,823,818			3,313,558			461,274		3,774,832
Less: unearned income and deferred costs and fees		(2,905	)		0		(2,905	)		(2,790	)		0		(2,790	)
Total loans and leases, net of unearned income and deferred costs and fees	$	3,370,791		$	450,122	$	3,820,913		$	3,310,768		$	461,274	$	3,772,042


The outstanding principal balance and the related carrying amount of the Company’s loans acquired in the VIST Bank acquisition are as follows at March 31, 2016 and December 31, 2015:

(in thousands)		03/31/2016		12/31/2015
Acquired Credit Impaired Loans
Outstanding principal balance	$	30,851	$	32,752
Carrying amount		25,460		26,507

Acquired Non-Credit Impaired Loans
Outstanding principal balance		429,177		439,389
Carrying amount		424,662		434,767

Total Acquired Loans
Outstanding principal balance		460,028		472,141
Carrying amount		450,122		461,274

The following tables present changes in accretable yield on loans acquired from VIST Bank that were considered credit impaired.


(in thousands)
Balance at January 1, 2015	$	8,604
Accretion		(2,696	)
Disposals (loans paid in full)		(331	)
Reclassifications to/from nonaccretable difference¹		1,215
Balance at December 31, 2015	$	6,792

(in thousands)
Balance at January 1, 2016	$	6,792
Accretion		(532	)
Reclassifications to/from nonaccretable difference¹		244
Balance at March 31, 2016	$	6,504

¹Results in increased interest income as a prospective yield adjustment over the remaining life of the loans, as well as increased interest income from loan sales, modification and prepayments.

At March 31, 2016, acquired loans included $12.7 million of covered loans. VIST Bank had previously acquired these loans in an FDIC assisted transaction in the fourth quarter of 2010. In accordance with a loss sharing agreement with the FDIC, certain losses and expenses relating to covered loans may be reimbursed by the FDIC at 70% or, if net losses exceed certain levels specified in the loss sharing agreements, 80%. See Note 7 – “FDIC Indemnification Asset Related to Covered Loans” for further discussion of the loss sharing agreements and related FDIC indemnification assets.

The Company has adopted comprehensive lending policies, underwriting standards and loan review procedures. Management reviews these policies and procedures on a regular basis. The Company discussed its lending policies and underwriting guidelines for its various lending portfolios in Note 3 – “Loans and Leases” in the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. There have been no significant changes in these policies and guidelines since December 31, 2015. As such, these policies are reflective of new originations as well as those balances held at March 31, 2016. The Company’s Board of Directors approves the lending policies at least annually. The Company recognizes that exceptions to policy guidelines may occasionally occur and has established procedures for approving exceptions to these policy guidelines. Management has also implemented reporting systems to monitor loan origination, loan quality, concentrations of credit, loan delinquencies and nonperforming loans and potential problem loans.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments are due. Generally loans are placed on nonaccrual status if principal or interest payments become 90 days or more past due and/or management deems the collectability of the principal and/or interest to be in question as well as when required by regulatory agencies. When interest accrual is discontinued, all unpaid accrued interest is reversed. Payments received on loans on nonaccrual are generally applied to reduce the principal balance of the loan. Loans are generally returned to accrual status when all the principal and interest amounts contractually due are brought current, the borrower has established a payment history, and future payments are reasonably assured. When management determines that the collection of principal in full is not probable, management will charge-off a partial amount or full amount of the loan balance. Management considers specific facts and circumstances relative to each individual credit in making such a determination. For residential and consumer loans, management uses specific regulatory guidance and thresholds for determining charge-offs.

Acquired loans that met the criteria for nonaccrual of interest prior to the acquisition may be considered performing after the date of acquisition, regardless of whether the customer is contractually delinquent, if we can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans. As such, we may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable discount. To the extent we cannot reasonably estimate cash flows, interest income recognition is discontinued. The Company has determined that it can reasonably estimate future cash flows on our acquired loans that are past due 90 days or more and accruing interest and the Company expects to fully collect the carrying value of the loans.

The below table is an age analysis of past due loans, segregated by originated and acquired loan and lease portfolios, and by class of loans, as of March 31, 2016 and December 31, 2015.


March 31, 2016
(in thousands)	30-89 days		90 days or more		Current Loans		Total Loans		90 days and accruing¹		Nonaccrual
Originated Loans and Leases
Commercial and industrial
Agriculture	$	0	$	0	$	74,890	$	74,890	$	0	$	0
Commercial and industrial other		178		172		768,697		769,047		0		575
Subtotal commercial and industrial		178		172		843,587		843,937		0		575
Commercial real estate
Construction		0		0		115,584		115,584		0		0
Agriculture		0		0		94,300		94,300		0		105
Commercial real estate other		1,016		2,303		1,210,871		1,214,190		0		5,007
Subtotal commercial real estate		1,016		2,303		1,420,755		1,424,074		0		5,112
Residential real estate
Home equity		602		1,304		197,339		199,245		57		1,423
Mortgages		317		4,647		829,334		834,298		0		5,397
Subtotal residential real estate		919		5,951		1,026,673		1,033,543		57		6,820
Consumer and other
Indirect		361		36		17,317		17,714		0		70
Consumer and other		45		22		39,935		40,002		0		94
Subtotal consumer and other		406		58		57,252		57,716		0		164
Leases		0		0		14,426		14,426		0		0
Total loans and leases		2,519		8,484		3,362,693		3,373,696		57		12,671
Less: unearned income and deferred costs and fees		0		0		(2,905)		(2,905)		0		0
Total originated loans and leases, net of unearned income and deferred costs and fees	$	2,519	$	8,484	$	3,359,788	$	3,370,791	$	57	$	12,671
Acquired Loans and Leases
Commercial and industrial
Commercial and industrial other		56		620		85,866		86,542		54		566
Subtotal commercial and industrial		56		620		85,866		86,542		54		566
Commercial real estate
Construction		0		354		1,755		2,109		0		354
Agriculture		0		0		2,013		2,013		0		0
Commercial real estate other		67		1,510		276,446		278,023		502		1,257
Subtotal commercial real estate		67		1,864		280,214		282,145		502		1,611
Residential real estate
Home equity		317		312		40,213		40,842		0		597
Mortgages		598		1,664		24,609		26,871		890		1,371
Subtotal residential real estate		915		1,976		64,822		67,713		890		1,968
Consumer and other
Consumer and other		0		0		985		985		0		0
Subtotal consumer and other		0		0		985		985		0		0
Covered loans		1		469		12,267		12,737		469		0
Total acquired loans and leases, net of unearned income and deferred costs and fees	$	1,039	$	4,929	$	444,154	$	450,122	$	1,915	$	4,145

December 31, 2015
(in thousands)		30-89 days		90 days or more		Current Loans		Total Loans		90 days and accruing¹		Nonaccrual
Originated loans and leases
Commercial and industrial
	Agriculture	$	0	$	0	$	88,299	$	88,299	$	0	$	0
	Commercial and industrial other		507		867		766,650		768,024		0		1,091
Subtotal commercial and industrial			507		867		854,949		856,323		0		1,091
Commercial real estate
	Construction		0		0		103,037		103,037		0		0
	Agriculture		0		0		86,935		86,935		0		106
	Commercial real estate other		225		3,580		1,163,445		1,167,250		0		4,365
Subtotal commercial real estate			225		3,580		1,353,417		1,357,222		0		4,471
Residential real estate
	Home equity		729		1,868		199,981		202,578		58		1,873
	Mortgages		1,161		5,140		817,540		823,841		0		5,889
Subtotal residential real estate			1,890		7,008		1,017,521		1,026,419		58		7,762
Consumer and other
	Indirect		494		250		17,085		17,829		0		107
	Consumer and other		164		0		40,740		40,904		0		75
Subtotal consumer and other			658		250		57,825		58,733		0		182
Leases			0		0		14,861		14,861		0		0
Total loans and leases			3,280		11,705		3,298,573		3,313,558		58		13,506
Less: unearned income and deferred costs and fees			0		0		(2,790)		(2,790)		0		0
Total originated loans and leases, net of unearned income and deferred costs and fees		$	3,280	$	11,705	$	3,295,783	$	3,310,768	$	58	$	13,506
Acquired loans and leases
Commercial and industrial
	Commercial and industrial other		20		936		83,854		84,810		338		647
Subtotal commercial and industrial			20		936		83,854		84,810		338		647
Commercial real estate
	Construction		0		359		4,533		4,892		0		359
	Agriculture		0		0		2,095		2,095		0		0
	Commercial real estate other		150		1,671		283,131		284,952		550		1,224
Subtotal commercial real estate			150		2,030		289,759		291,939		550		1,583
Residential real estate
	Home equity		426		364		41,302		42,092		0		712
	Mortgages		336		1,926		25,229		27,491		1,103		1,389
Subtotal residential real estate			762		2,290		66,531		69,583		1,103		2,101
Consumer and other
	Consumer and other		1		0		910		911		0		0
Subtotal consumer and other			1		0		910		911		0		0
Covered loans			276		524		13,231		14,031		524		0
Total acquired loans and leases, net of unearned income and deferred costs and fees		$	1,209	$	5,780	$	454,285	$	461,274	$	2,515	$	4,331
¹Includes acquired loans that were recorded at fair value at the acquisition date.