Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | 3. LOANS AND ALLOWANCE FOR LOAN LOSSES Loans originated for investment are stated at their principal amount outstanding adjusted for partial charge-offs, the allowance, and net deferred loan fees and costs. Interest income on loans is accrued over the term of the loans primarily using the simple interest method based on the principal balance outstanding. Interest is not accrued on loans where collectability is uncertain. Accrued interest is presented separately in the consolidated balance sheet. Loan origination fees and certain direct costs incurred to extend credit are deferred and amortized over the term of the loan or loan commitment period as an adjustment to the related loan yield. Acquired loans are those purchased in the Firstbank merger. These loans were recorded at estimated fair value at the Merger Date with no carryover of the related allowance. The acquired loans were segregated between those considered to be performing (“acquired non-impaired loans”) and those with evidence of credit deterioration (“acquired impaired loans”). Acquired loans are considered impaired if there is evidence of credit deterioration and if it is probable, at acquisition, all contractually required payments will not be collected. Acquired loans restructured after acquisition are not considered or reported as troubled debt restructurings if the loans evidenced credit deterioration as of the Merger Date and are accounted for in pools. The fair value estimates for acquired loans are based on expected prepayments and the amount and timing of discounted expected principal, interest and other cash flows. Credit discounts representing the principal losses expected over the life of the loan are also a component of the initial fair value. In determining the Merger Date fair value of acquired impaired loans, and in subsequent accounting, we have generally aggregated acquired commercial and consumer loans into pools of loans with common risk characteristics. The difference between the fair value of an acquired non-impaired loan and contractual amounts due at the Merger Date is accreted into income over the estimated life of the loan. Contractually required payments represent the total undiscounted amount of all uncollected principal and interest payments. Acquired non-impaired loans are placed on nonaccrual status and reported as nonperforming or past due using the same criteria applied to the originated loan portfolio. The excess of an acquired impaired loan’s undiscounted contractually required payments over the amount of its undiscounted cash flows expected to be collected is referred to as the non-accretable difference. The non-accretable difference, which is neither accreted into income nor recorded on the consolidated balance sheet, reflects estimated future credit losses and uncollectible contractual interest expected to be incurred over the life of the acquired impaired loan. The excess cash flows expected to be collected over the carrying amount of the acquired loan is referred to as the accretable yield. This amount is accreted into interest income over the remaining life of the acquired loans or pools using the level yield method. The accretable yield is affected by changes in interest rate indices for variable rate loans, changes in prepayment speed assumptions and changes in expected principal and interest payments over the estimated lives of the acquired impaired loans. We evaluate quarterly the remaining contractual required payments receivable and estimate cash flows expected to be collected over the lives of the impaired loans. Contractually required payments receivable may increase or decrease for a variety of reasons, for example, when the contractual terms of the loan agreement are modified, when interest rates on variable rate loans change, or when principal and/or interest payments are received. Cash flows expected to be collected on acquired impaired loans are estimated by incorporating several key assumptions similar to the initial estimate of fair value. These key assumptions include probability of default, loss given default, and the amount of actual prepayments after the Merger Date. Prepayments affect the estimated lives of loans and could change the amount of interest income, and possibly principal, expected to be collected. In re-forecasting future estimated cash flows, credit loss expectations are adjusted as necessary. The adjustments are based, in part, on actual loss severities recognized for each loan type, as well as changes in the probability of default. For periods in which estimated cash flows are not re-forecasted, the prior reporting period’s estimated cash flows are adjusted to reflect the actual cash received and credit events that transpired during the current reporting period. Increases in expected cash flows of acquired impaired loans subsequent to the Merger Date are recognized prospectively through adjustments of the yield on the loans or pools over their remaining lives, while decreases in expected cash flows are recognized as impairment through a provision for loan losses and an increase in the allowance. Our total loans at September 30, 2015 were $2.22 billion compared to $2.09 billion at December 31, 2014, an increase of $128 million, or 6.1%. The components of our loan portfolio disaggregated by class of loan within the loan portfolio segments at September 30, 2015 and December 31, 2014, and the percentage change in loans from the end of 2014 to the end of the third quarter of 2015, are as follows: Percent September 30, 2015 December 31, 2014 Increase Balance % Balance % (Decrease) Originated loans Commercial: Commercial and industrial $ 522,346,000 34.4 % $ 384,570,000 30.8 % 35.8 % Vacant land, land development, and residential construction 30,958,000 2.0 29,826,000 2.4 3.8 Real estate – owner occupied 306,539,000 20.2 291,758,000 23.4 5.1 Real estate – non-owner occupied 505,715,000 33.3 410,977,000 33.0 23.1 Real estate – multi-family and residential rental 36,762,000 2.4 36,058,000 2.9 2.0 Total commercial 1,402,320,000 92.3 1,153,189,000 92.5 21.6 Retail: Home equity and other 65,671,000 4.3 50,059,000 4.0 31.2 1-4 family mortgages 51,719,000 3.4 42,868,000 3.5 20.6 Total retail 117,390,000 7.7 92,927,000 7.5 26.3 Total originated loans $ 1,519,710,000 100.0 % $ 1,246,116,000 100.0 % 22.0 % Percent September 30, 2015 December 31, 2014 Increase Balance % Balance % (Decrease) Acquired loans Commercial: Commercial and industrial $ 120,772,000 17.3 % $ 166,037,000 19.7 (27.3% ) Vacant land, land development, and residential construction 16,776,000 2.4 22,148,000 2.6 (24.3 ) Real estate – owner occupied 120,477,000 17.3 138,630,000 16.4 (13.1 ) Real estate – non-owner occupied 130,512,000 18.7 148,597,000 17.6 (12.2 ) Real estate – multi-family and residential rental 86,763,000 12.4 86,702,000 10.3 0.1 Total commercial 475,300,000 68.1 562,114,000 66.6 (15.4 ) Retail: Home equity and other 81,094,000 11.6 109,219,000 13.0 (25.8 ) 1-4 family mortgages 141,284,000 20.3 171,828,000 20.4 (17.8 ) Total retail 222,378,000 31.9 281,047,000 33.4 (20.9 ) Total acquired loans $ 697,678,000 100.0 % $ 843,161,000 100.0 % (17.3% ) Percent September 30, 2015 December 31, 2014 Increase Balance % Balance % (Decrease) Total loans Commercial: Commercial and industrial $ 643,118,000 29.0 % $ 550,607,000 26.4 % 16.8 % Vacant land, land development, and residential construction 47,734,000 2.2 51,974,000 2.5 (8.2 ) Real estate – owner occupied 427,016,000 19.3 430,388,000 20.5 (0.8 ) Real estate – non-owner occupied 636,227,000 28.6 559,574,000 26.8 13.7 Real estate – multi-family and residential rental 123,525,000 5.6 122,760,000 5.9 0.6 Total commercial 1,877,620,000 84.7 1,715,303,000 82.1 9.5 Retail: Home equity and other 146,765,000 6.6 159,278,000 7.6 (7.9 ) 1-4 family mortgages 193,003,000 8.7 214,696,000 10.3 (10.1 ) Total retail 339,768,000 15.3 373,974,000 17.9 (9.1 ) Total loans $ 2,217,388,000 100.0 % $ 2,089,277,000 100.0 % 6.1 % The total outstanding balance and carrying value of acquired impaired loans was $25.9 million and $14.1 million, respectively, as of September 30, 2015. Changes in the accretable yield for acquired impaired loans for the three and nine months ended September 30, 2015 were as follows: Balance at June 30, 2015 $ 5,115,000 Additions 16,000 Accretion income (653,000 ) Net reclassification from nonaccretable to accretable 1,520,000 Reductions (1) (548,000 ) Ending balance $ 5,450,000 Balance at December 31, 2014 $ 4,998,000 Additions 16,000 Accretion income (1,980,000 ) Net reclassification from nonaccretable to accretable 3,166,000 Reductions (1) (750,000 ) Ending balance $ 5,450,000 (1) Reductions primarily reflect the result of exit events, including loan payoffs and charge-offs. Nonperforming originated loans as of September 30, 2015 and December 31, 2014 were as follows: September 30, December 31, 2015 2014 Loans past due 90 days or more still accruing interest $ 0 $ 0 Nonaccrual loans 2,590,000 26,048,000 Total nonperforming originated loans $ 2,590,000 $ 26,048,000 Nonperforming acquired loans as of September 30, 2015 and December 31, 2014 were as follows: September 30, December 31, 2015 2014 Loans past due 90 days or more still accruing interest $ 43,000 $ 26,000 Nonaccrual loans 5,581,000 3,358,000 Total nonperforming acquired loans $ 5,624,000 $ 3,384,000 The recorded principal balance of nonperforming loans was as follows: September 30, December 31, 2015 2014 Commercial: Commercial and industrial $ 671,000 $ 6,478,000 Vacant land, land development, and residential construction 170,000 209,000 Real estate – owner occupied 2,262,000 18,062,000 Real estate – non-owner occupied 79,000 378,000 Real estate – multi-family and residential rental 2,465,000 106,000 Total commercial 5,647,000 25,233,000 Retail: Home equity and other 749,000 800,000 1-4 family mortgages 1,818,000 3,399,000 Total retail 2,567,000 4,199,000 Total nonperforming loans $ 8,214,000 $ 29,432,000 Acquired impaired loans are not reported as nonperforming loans based on acquired impaired loan accounting. Acquired non-impaired loans are placed on nonaccrual status and reported as nonperforming or past due using the same criteria applied to the originated loan portfolio. An age analysis of past due loans is as follows as of September 30, 2015: 30 – 59 60 – 89 Greater Than 89 Recorded Balance > 89 Days Days Days Total Total Days and Past Due Past Due Past Due Past Due Current Loans Accruing Originated loans Commercial: Commercial and industrial $ 28,000 $ 0 $ 0 $ 28,000 $ 522,318,000 $ 522,346,000 $ 0 Vacant land, land development, and residential construction 0 0 0 0 30,958,000 30,958,000 0 Real estate – owner occupied 0 0 13,000 13,000 306,526,000 306,539,000 0 Real estate – non-owner occupied 0 0 0 0 505,715,000 505,715,000 0 Real estate – multi-family and residential rental 0 0 0 0 36,762,000 36,762,000 0 Total commercial 28,000 0 13,000 41,000 1,402,279,000 1,402,320,000 0 Retail: Home equity and other 33,000 21,000 4,000 58,000 65,613,000 65,671,000 0 1-4 family mortgages 115,000 67,000 296,000 478,000 51,241,000 51,719,000 0 Total retail 148,000 88,000 300,000 536,000 116,854,000 117,390,000 0 Total past due loans $ 176,000 $ 88,000 $ 313,000 $ 577,000 $ 1,519,133,000 $ 1,519,710,000 $ 0 30 – 59 60 – 89 Greater Than 89 Recorded Balance > 89 Days Days Days Total Total Days and Past Due Past Due Past Due Past Due Current Loans Accruing Acquired loans Commercial: Commercial and industrial $ 385,000 $ 0 $ 574,000 $ 959,000 $ 119,813,000 $ 120,772,000 $ 0 Vacant land, land development, and residential construction 257,000 0 0 257,000 16,519,000 16,776,000 0 Real estate – owner occupied 1,078,000 93,000 802,000 1,973,000 118,504,000 120,477,000 0 Real estate – non-owner occupied 0 0 80,000 80,000 130,432,000 130,512,000 0 Real estate – multi-family and residential rental 173,000 0 2,447,000 2,620,000 84,143,000 86,763,000 0 Total commercial 1,893,000 93,000 3,903,000 5,889,000 469,411,000 475,300,000 0 Retail: Home equity and other 340,000 68,000 135,000 543,000 80,551,000 81,094,000 0 1-4 family mortgages 548,000 323,000 494,000 1,365,000 139,919,000 141,284,000 0 Total retail 888,000 391,000 629,000 1,908,000 220,470,000 222,378,000 0 Total past due loans $ 2,781,000 $ 484,000 $ 4,532,000 $ 7,797,000 $ 689,881,000 $ 697,678,000 $ 0 An age analysis of past due loans is as follows as of December 31, 2014: 30 – 59 60 – 89 Greater Than 89 Recorded Balance > 89 Days Days Days Total Total Days and Past Due Past Due Past Due Past Due Current Loans Accruing Originated loans Commercial: Commercial and industrial $ 0 $ 0 $ 0 $ 0 $ 384,570,000 $ 384,570,000 $ 0 Vacant land, land development, and residential construction 0 0 0 0 29,826,000 29,826,000 0 Real estate – owner occupied 0 0 120,000 120,000 291,638,000 291,758,000 0 Real estate – non-owner occupied 0 0 116,000 116,000 410,861,000 410,977,000 0 Real estate – multi-family and residential rental 0 0 0 0 36,058,000 36,058,000 0 Total commercial 0 0 236,000 236,000 1,152,953,000 1,153,189,000 0 Retail: Home equity and other 38,000 3,000 0 41,000 50,018,000 50,059,000 0 1-4 family mortgages 0 0 366,000 366,000 42,502,000 42,868,000 0 Total retail 38,000 3,000 366,000 407,000 92,520,000 92,927,000 0 Total past due loans $ 38,000 $ 3,000 $ 602,000 $ 643,000 $ 1,245,473,000 $ 1,246,116,000 $ 0 30 – 59 60 – 89 Greater Than 89 Recorded Balance > 89 Days Days Days Total Total Days and Past Due Past Due Past Due Past Due Current Loans Accruing Acquired Loans Commercial: Commercial and industrial $ 29,000 $ 32,000 $ 76,000 $ 137,000 $ 165,900,000 $ 166,037,000 $ 0 Vacant land, land development, and residential construction 0 38,000 0 38,000 22,110,000 22,148,000 0 Real estate – owner occupied 51,000 425,000 1,625,000 2,101,000 136,529,000 138,630,000 0 Real estate – non-owner occupied 68,000 598,000 395,000 1,061,000 147,536,000 148,597,000 0 Real estate – multi-family and residential rental 37,000 0 105,000 142,000 86,560,000 86,702,000 0 Total commercial 185,000 1,093,000 2,201,000 3,479,000 558,635,000 562,114,000 0 Retail: Home equity and other 445,000 419,000 155,000 1,019,000 108,200,000 109,219,000 26,000 1-4 family mortgages 1,087,000 408,000 750,000 2,245,000 169,583,000 171,828,000 0 Total retail 1,532,000 827,000 905,000 3,264,000 277,783,000 281,047,000 26,000 Total past due loans $ 1,717,000 $ 1,920,000 $ 3,106,000 $ 6,743,000 $ 836,418,000 $ 843,161,000 $ 26,000 Impaired originated loans as of September 30, 2015, and average originated impaired loans for the three and nine months ended September 30, 2015, were as follows: Third Quarter Year-To-Date Unpaid Average Average Contractual Recorded Recorded Recorded Principal Principal Related Principal Principal Balance Balance Allowance Balance Balance With no related allowance recorded Commercial: Commercial and industrial $ 1,893,000 $ 1,893,000 $ 1,908,000 $ 1,729,000 Vacant land, land development and residential construction 0 0 0 101,000 Real estate – owner occupied 302,000 103,000 113,000 1,032,000 Real estate – non-owner occupied 5,733,000 5,733,000 5,747,000 3,204,000 Real estate – multi-family and residential rental 0 0 151,000 232,000 Total commercial 7,928,000 7,729,000 7,919,000 6,298,000 Retail: Home equity and other 214,000 190,000 189,000 190,000 1-4 family mortgages 1,399,000 735,000 716,000 631,000 Total retail 1,613,000 925,000 905,000 821,000 Total with no related allowance recorded $ 9,541,000 $ 8,654,000 $ 8,824,000 $ 7,119,000 Third Quarter Year-To-Date Unpaid Average Average Contractual Recorded Recorded Recorded Principal Principal Related Principal Principal Balance Balance Allowance Balance Balance With an allowance recorded Commercial: Commercial and industrial $ 470,000 $ 413,000 $ 271,000 $ 436,000 $ 2,816,000 Vacant land, land development and residential construction 2,275,000 1,920,000 308,000 2,052,000 2,026,000 Real estate – owner occupied 6,377,000 1,824,000 494,000 1,959,000 8,778,000 Real estate – non-owner occupied 4,897,000 4,897,000 194,000 4,926,000 10,371,000 Real estate – multi-family and residential rental 1,052,000 1,052,000 390,000 1,179,000 1,266,000 Total commercial 15,071,000 10,106,000 1,657,000 10,552,000 25,257,000 Retail: Home equity and other 195,000 157,000 121,000 160,000 143,000 1-4 family mortgages 165,000 130,000 49,000 131,000 641,000 Total retail 360,000 287,000 170,000 291,000 784,000 Total with an allowance recorded $ 15,431,000 $ 10,393,000 $ 1,827,000 $ 10,843,000 $ 26,041,000 Total impaired loans: Commercial $ 22,999,000 $ 17,835,000 $ 1,657,000 $ 18,471,000 $ 31,555,000 Retail 1,973,000 1,212,000 170,000 1,196,000 1,605,000 Total impaired loans $ 24,972,000 $ 19,047,000 $ 1,827,000 $ 19,667,000 $ 33,160,000 Impaired acquired loans as of September 30, 2015, and average impaired acquired loans for the three and nine months ended September 30, 2015, were as follows: Third Quarter Year-To-Date Unpaid Average Average Contractual Recorded Recorded Recorded Principal Principal Related Principal Principal Balance Balance Allowance Balance Balance With no related allowance recorded Commercial: Commercial and industrial $ 1,697,000 $ 1,661,000 $ 1,596,000 $ 1,432,000 Vacant land, land development and residential construction 0 0 0 0 Real estate – owner occupied 1,593,000 1,391,000 910,000 535,000 Real estate – non-owner occupied 768,000 768,000 656,000 487,000 Real estate – multi-family and residential rental 2,680,000 2,637,000 2,885,000 1,799,000 Total commercial 6,738,000 6,457,000 6,047,000 4,253,000 Retail: Home equity and other 449,000 322,000 342,000 423,000 1-4 family mortgages 1,030,000 953,000 816,000 855,000 Total retail 1,479,000 1,275,000 1,158,000 1,278,000 Total with no related allowance recorded $ 8,217,000 $ 7,732,000 $ 7,205,000 $ 5,531,000 Third Quarter Year-To-Date Unpaid Average Average Contractual Recorded Recorded Recorded Principal Principal Related Principal Principal Balance Balance Allowance Balance Balance With an allowance recorded Commercial: Commercial and industrial $ 66,000 $ 66,000 $ 5,000 $ 73,000 $ 65,000 Vacant land, land development and residential construction 0 0 0 0 0 Real estate – owner occupied 51,000 51,000 4,000 568,000 1,016,000 Real estate – non-owner occupied 0 0 0 0 0 Real estate – multi-family and residential rental 25,000 25,000 0 26,000 20,000 Total commercial 142,000 142,000 9,000 667,000 1,101,000 Retail: Home equity and other 0 0 0 0 0 1-4 family mortgages 176,000 176,000 6,000 229,000 185,000 Total retail 176,000 176,000 6,000 229,000 185,000 Total with an allowance recorded $ 318,000 $ 318,000 $ 15,000 $ 896,000 $ 1,286,000 Total impaired loans: Commercial $ 6,880,000 $ 6,599,000 $ 9,000 $ 6,714,000 $ 5,354,000 Retail 1,655,000 1,451,000 6,000 1,387,000 1,463,000 Total impaired loans $ 8,535,000 $ 8,050,000 $ 15,000 $ 8,101,000 $ 6,817,000 Impaired originated loans as of December 31, 2014, and average impaired originated loans for the three and nine months ended September 30, 2014, were as follows: Third Quarter Year-To-Date Unpaid Average Average Contractual Recorded Recorded Recorded Principal Principal Related Principal Principal Balance Balance Allowance Balance Balance With no related allowance recorded Commercial: Commercial and industrial $ 1,170,000 $ 1,164,000 $ 691,000 $ 525,000 Vacant land, land development and residential construction 540,000 209,000 111,000 232,000 Real estate – owner occupied 3,609,000 1,901,000 9,227,000 4,981,000 Real estate – non-owner occupied 1,210,000 1,210,000 576,000 911,000 Real estate – multi-family and residential rental 375,000 317,000 0 0 Total commercial 6,904,000 4,801,000 10,605,000 6,649,000 Retail: Home equity and other 207,000 191,000 642,000 598,000 1-4 family mortgages 1,144,000 560,000 553,000 591,000 Total retail 1,351,000 751,000 1,195,000 1,189,000 Total with no related allowance recorded $ 8,255,000 $ 5,552,000 $ 11,800,000 $ 7,838,000 Third Quarter Year-To-Date Unpaid Average Average Contractual Recorded Recorded Recorded Principal Principal Related Principal Principal Balance Balance Allowance Balance Balance With an allowance recorded Commercial: Commercial and industrial $ 5,299,000 $ 5,226,000 $ 1,578,000 $ 3,087,000 $ 2,142,000 Vacant land, land development and residential construction 2,000,000 2,000,000 151,000 3,049,000 3,536,000 Real estate – owner occupied 15,745,000 15,674,000 2,200,000 2,238,000 1,869,000 Real estate – non-owner occupied 16,033,000 15,949,000 4,779,000 17,377,000 18,819,000 Real estate – multi-family and residential rental 1,371,000 1,371,000 666,000 1,679,000 1,783,000 Total commercial 40,448,000 40,220,000 9,374,000 27,430,000 28,149,000 Retail: Home equity and other 115,000 84,000 84,000 88,000 139,000 1-4 family mortgages 2,194,000 2,000,000 694,000 2,093,000 2,144,000 Total retail 2,309,000 2,084,000 778,000 2,181,000 2,283,000 Total with an allowance recorded $ 42,757,000 $ 42,304,000 $ 10,152,000 $ 29,611,000 $ 30,432,000 Total impaired loans: Commercial $ 47,352,000 $ 45,021,000 $ 9,374,000 $ 38,035,000 $ 34,798,000 Retail 3,660,000 2,835,000 778,000 3,376,000 3,472,000 Total impaired loans $ 51,012,000 $ 47,856,000 $ 10,152,000 $ 41,411,000 $ 38,270,000 Impaired acquired loans as of December 31, 2014, and average impaired acquired loans for the three and nine months ended September 30, 2014, were as follows: Third Quarter Year-To-Date Unpaid Average Average Contractual Recorded Recorded Recorded Principal Principal Related Principal Principal Balance Balance Allowance Balance Balance With no related allowance recorded Commercial: Commercial and industrial $ 1,586,000 $ 1,579,000 $ 0 $ 0 Vacant land, land development and residential construction 0 0 0 0 Real estate – owner occupied 113,000 113,000 0 0 Real estate – non-owner occupied 326,000 326,000 0 0 Real estate – multi-family and residential rental 487,000 487,000 0 0 Total commercial 2,512,000 2,505,000 0 0 Retail: Home equity and other 641,000 639,000 0 0 1-4 family mortgages 866,000 866,000 0 0 Total retail 1,507,000 1,505,000 0 0 Total with no related allowance recorded $ 4,019,000 $ 4,010,000 $ 0 $ 0 Third Quarter Year-To-Date Unpaid Average Average Contractual Recorded Recorded Recorded Principal Principal Related Principal Principal Balance Balance Allowance Balance Balance With an allowance recorded Commercial: Commercial and industrial $ 0 $ 0 $ 0 $ 0 $ 0 Vacant land, land development and residential construction 0 0 0 0 0 Real estate – owner occupied 1,516,000 1,502,000 605,000 0 0 Real estate – non-owner occupied 0 0 0 0 0 Real estate – multi-family and residential rental 0 0 0 0 0 Total commercial 1,516,000 1,502,000 605,000 0 0 Retail: Home equity and other 0 0 0 0 0 1-4 family mortgages 0 0 0 0 0 Total retail 0 0 0 0 0 Total with an allowance recorded $ 1,516,000 $ 1,502,000 $ 605,000 $ 0 $ 0 Total impaired loans: Commercial $ 4,028,000 $ 4,007,000 $ 605,000 $ 0 $ 0 Retail 1,507,000 1,505,000 0 0 0 Total impaired loans $ 5,535,000 $ 5,512,000 $ 605,000 $ 0 $ 0 Impaired loans for which no allocation of the allowance for loan losses has been made generally reflect situations whereby the loans have been charged-down to estimated collateral value. Interest income recognized on accruing troubled debt restructurings totaled $0.3 million and $0.6 million during the third quarter of 2015 and 2014, respectively, while interest income recognized on accruing troubled debt restructurings totaled $1.0 million and $1.3 million during the first nine months of 2015 and 2014, respectively. No interest income was recognized on nonaccrual loans during the third quarter and first nine months of 2015 or during the respective 2014 periods. Credit Quality Indicators. Credit quality indicators were as follows as of September 30, 2015: Originated loans Commercial credit exposure – credit risk profiled by internal credit risk grades: Commercial and Industrial Commercial Vacant Land, Land Development, and Residential Construction Commercial Real Estate - Owner Occupied Commercial Real Estate - Non-Owner Occupied Commercial Real Estate - Multi-Family and Residential Rental Internal credit risk grade groupings: Grades 1 – 4 $ 363,211,000 $ 17,906,000 $ 211,563,000 $ 378,741,000 $ 18,842,000 Grades 5 – 7 158,699,000 11,132,000 92,583,000 121,241,000 16,868,000 Grades 8 – 9 436,000 1,920,000 2,393,000 5,733,000 1,052,000 Total commercial $ 522,346,000 $ 30,958,000 $ 306,539,000 $ 505,715,000 $ 36,762,000 Retail credit exposure – credit risk profiled by collateral type: Retail Retail Home Equity 1-4 Family and Other Mortgages Total retail $ 65,671,000 $ 51,719,000 Acquired loans Commercial credit exposure – credit risk profiled by internal credit risk grades: Commercial and Industrial Commercial Vacant Land, Land Development, and Residential Construction Commercial Real Estate - Owner Occupied Commercial Real Estate - Non-Owner Occupied Commercial Real Estate - Multi-Family and Residential Rental Internal credit risk grade groupings: Grades 1 – 4 $ 67,167,000 $ 4,918,000 $ 46,693,000 $ 70,884,000 $ 46,299,000 Grades 5 – 7 50,573,000 11,028,000 68,194,000 57,262,000 37,162,000 Grades 8 – 9 3,032,000 830,000 5,590,000 2,366,000 3,302,000 Total commercial $ 120,772,000 $ 16,776,000 $ 120,477,000 $ 130,512,000 $ 86,763,000 Retail credit exposure – credit risk profiled by collateral type: Retail Retail Home Equity 1-4 Family and Other Mortgages Total retail $ 81,094,000 $ 141,284,000 Credit quality indicators were as follows as of December 31, 2014: Originated loans Commercial credit exposure – credit risk profiled by internal credit risk grades: Commercial and Industrial Commercial Vacant Land, Land Development, and Residential Construction Commercial Real Estate - Owner Occupied Commercial Real Estate - Non-OwnerOccupied Commercial Real Estate - Multi-Family and Residential Rental Internal credit risk grade groupings: Grades 1 – 4 $ 266,631,000 $ 11,242,000 $ 190,656,000 $ 285,035,000 $ 12,394,000 Grades 5 – 7 109,639,000 16,375,000 83,123,000 113,982,000 22,282,000 Grades 8 – 9 8,300,000 2,209,000 17,979,000 11,960,000 1,382,000 Total commercial $ 384,570,000 $ 29,826,000 $ 291,758,000 $ 410,977,000 $ 36,058,000 Retail credit exposure – credit risk profiled by collateral type: Retail Retail Home Equity 1-4 Family and Other Mortgages Total retail $ 50,059,000 $ 42,868,000 Acquired loans Commercial credit exposure – credit risk profiled by internal credit risk grades: Commercial and Industrial Commercial Vacant Land, Land Development, and Residential Construction Commercial Real Estate - Owner Occupied Commercial Real Estate - Non-Owner Occupied Commercial Real Estate - Multi-Family and Residential Rental Internal credit risk grade groupings: Grades 1 – 4 $ 72,411,000 $ 5,875,000 $ 39,496,000 $ 65,886,000 $ 35,858,000 Grades 5 – 7 90,320,000 14,472,000 92,212,000 78,103,000 49,781,000 Grades 8 – 9 3,306,000 1,801,000 6,922,000 4,608,000 1,063,000 Total commercial $ 166,037,000 $ 22,148,000 $ 138,630,000 $ 148,597,000 $ 86,702,000 Retail credit exposure – credit risk profiled by collateral type: Retail Retail Home Equity 1-4 Family and Other Mortgages Total retail $ 109,219,000 $ 171,828,000 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS All commercial loans are graded using the following criteria: Grade 1. Excellent credit rating that contain very little, if any, risk of loss. Grade 2. Strong sources of repayment and have low repayment risk. Grade 3. Good sources of repayment and have limited repayment risk. Grade 4. Adequate sources of repayment and acceptable repayment risk; however, characteristics are present that render the credit more vulnerable to a negative event. Grade 5. Marginally acceptable sources of repayment and exhibit defined weaknesses and negative characteristics. Grade 6. Well defined weaknesses which may include negative current cash flow, high leverage, or operating losses. Generally, if the credit does not stabilize or if further deterioration is observed in the near term, the loan will likely be downgraded and placed on the Watch List (i.e., list of lending relationships that receive increased scrutiny and review by the Board of Directors and senior management). Grade 7. Defined weaknesses or negative trends that merit close monitoring through Watch List status. Grade 8. Inadequately protected by current sound net worth, paying capacity of the obligor, or pledged collateral, resulting in a distinct possibility of loss requiring close monitoring through Watch List status. Grade 9. Vital weaknesses exist where collection of principal is highly questionable. Grade 10. Considered uncollectable and of such little value that continuance as an asset is not warranted. The primary risk elements with respect to commercial loans are the financial condition of the borrower, the sufficiency of collateral, and timeliness of scheduled payments. We have a policy of requesting and reviewing periodic financial statements from commercial loan customers and employ a disciplined and formalized review of the existence of collateral and its value. The primary risk element with respect to each residential real estate loan and consumer loan is the timeliness of scheduled payments. We have a reporting system that monitors past due loans and have adopted policies to pursue creditor’s rights in order to preserve our collateral position. Activity in the allowance for loan losses and the recorded investments in originated loans as of and during the three and nine months ended September 30, 2015 are as follows: Commercial Retail Loans Loans Unallocated Total Allowance for loan losses: Balance at June 30, 2015 $ 13,992,000 $ 1,714,000 $ 34,000 $ 15,740,000 Provision for loan losses 9,000 (13,000 ) (89,000 ) (93,000 ) Charge-offs 0 (46,000 ) 0 (46,000 ) Recoveries 200,000 36,000 0 236,000 Ending balance $ 14,201,000 $ 1,691,000 $ (55,000 ) $ 15,837,000 Allowance for loan losses: Balance at December 31, 2014 $ 17,736,000 $ 1,487,000 $ 76,000 $ 19,299,000 Provision for loan losses (1,641,000 ) 578,000 (131,000 ) (1,194,000 ) Charge-offs (4,276,000 ) (563,000 ) 0 (4,839,000 ) Recoveries 2,382,000 189,000 0 2,571,000 Ending balance $ 14,201,000 $ 1,691,000 $ (55,000 ) $ 15,837,000 Ending balance: individually evaluated for impairment $ 1,657,000 $ 170,000 $ 0 $ 1,827,000 Ending balance: collectively evaluated for impairment $ 12,544,000 $ 1,521,000 $ (55,000 ) $ 14,010,000 Total loans: Ending balance $ 1,402,320,000 $ 117,390,000 $ 1,519,710,000 Ending balance: individually evaluated for impairment $ 17,835,000 $ 1,212,000 $ 19,047,000 Ending balance: collectively evaluated for impairment $ 1,384,485,000 $ 116,178,000 $ 1,500,663,000 Activity in the allowance for loan losses for acquired loans during the three and nine months ended September 30, 2015 is as follows: Commercial Retail Loans Loans Unallocated Total Allowance for loan losses: Balance at June 30, 2015 $ 561,000 $ 260,000 $ 0 $ 821,000 Provision for loan losses (389,000 ) (18,000 ) 0 (407,000 ) Charge-offs (87,000 ) (49,000 ) 0 (136,000 ) Recoveries 0 4,000 0 4,000 Ending balance $ 85,000 $ 197,000 $ 0 $ 282,000 Allowance for loan losses: Balance at December 31, 2014 $ 681,000 $ 61,000 $ 0 $ 742,000 Provision for loan losses (479,000 ) 173,000 0 (306,000 ) Charge-offs (118,000 ) (56,000 ) 0 (174,000 ) Recoveries 1,000 19,000 0 20,000 Ending balance $ 85,000 $ 197,000 $ 0 $ 282,000 In accordance with acquisition accounting rules, acquired loans were recorded at fair value at the Merger Date and the prior allowance was eliminated. Activity in the allowance for loan losses and the recorded investments in originated loans as of and during the three and nine months ended September 30, 2014 are as follows: Commercial Retail Loans Loans Unallocated Total Allowance for loan losses: Balance at June 30, 2014 $ 19,107,000 $ 1,774,000 $ (25,000 ) $ 20,856,000 Provision for loan losses (473,000 ) 63,000 10,000 (400,000 ) Charge-offs (24,000 ) (321,000 ) 0 (345,000 ) Recoveries 102,000 161,000 0 263,000 Ending balance $ 18,712,000 $ 1,677,000 $ (15,000 ) $ 20,374,000 Allowance for loan losses: Balance at December 31, 2013 $ 20,455,000 $ 2,358,000 $ 8,000 $ 22,821,000 Provision for loan losses (2,251,000 ) (726,000 ) (23,000 ) (3,000,000 ) Charge-offs (708,000 ) (328,000 ) 0 (1,036,000 ) Recoveries 1,216,000 373,000 0 1,589,000 Ending balance $ 18,712,000 $ 1,677,000 $ (15,000 ) $ 20,374,000 Ending balance: individually evaluated for impairment $ 10,485,000 $ 879,000 $ 0 $ 11,364,000 Ending balance: collectively evaluated for impairment $ 8,227,000 $ 798,000 $ (15,000 ) $ 9,010,000 Total loans: Ending balance $ 1,103,802,000 $ 82,911,000 $ 1,186, |