CREDIT QUALITY ASSESSMENT | Note 4 – CREDIT QUALITY ASSESSMENT Allowance for Loan and Lease Losses Summary information on the allowance for loan and lease loss activity for the period indicated is provided in the following table: Six Months Ended June 30, (In thousands) 2015 2014 Balance at beginning of year $ 37,802 $ 38,766 Provision for loan and lease losses 1,815 (824) Loan and lease charge-offs (1,837) (1,176) Loan and lease recoveries 933 1,193 Net (charge-offs) recoveries (904) 17 Balance at period end $ 38,713 $ 37,959 The following tables provide information on the activity in the allowance for loan and lease losses by the respective loan portfolio segment for the period indicated: For the Six Months Ended June 30, 2015 Commercial Real Estate Residential Real Estate Commercial Commercial Commercial Commercial Owner Residential Residential (Dollars in thousands) Business AD&C Investor R/E Occupied R/E Leasing Consumer Mortgage Construction Total Balance at beginning of year $ 5,852 $ 4,267 $ 9,784 $ 7,143 $ 9 $ 3,592 $ 6,232 $ 923 $ 37,802 Provision (credit) 13 (336) 947 584 - 234 318 55 1,815 Charge-offs (181) (739) (90) (212) - (537) (78) - (1,837) Recoveries 197 580 10 1 - 99 31 15 933 Net charge-offs 16 (159) (80) (211) - (438) (47) 15 (904) Balance at end of period $ 5,881 $ 3,772 $ 10,651 $ 7,516 $ 9 $ 3,388 $ 6,503 $ 993 $ 38,713 Total loans and leases $ 409,795 $ 223,103 $ 694,179 $ 643,973 $ 21 $ 436,465 $ 744,195 $ 137,134 $ 3,288,865 Allowance for loans and leases to total loans and leases ratio 1.44% 1.69% 1.53% 1.17% 42.86% 0.78% 0.87% 0.72% 1.18% Balance of loans specifically evaluated for impairment $ 4,181 $ 194 $ 12,126 $ 8,423 $ na. $ na. $ 3,770 $ na. $ 28,694 Allowance for loans specifically evaluated for impairment $ 1,047 $ 58 $ 715 $ 1,066 $ na. $ na. $ - $ na. $ 2,886 Specific allowance to specific loans ratio 25.04% 29.90% 5.90% 12.66% na. na. na. na. 10.06% Balance of loans collectively evaluated $ 405,614 $ 222,909 $ 682,053 $ 635,550 $ 21 $ 436,465 $ 740,425 $ 137,134 $ 3,260,171 Allowance for loans collectively evaluated $ 4,834 $ 3,714 $ 9,936 $ 6,450 $ 9 $ 3,388 $ 6,503 $ 993 $ 35,827 Collective allowance to collective loans ratio 1.19% 1.67% 1.46% 1.01% 42.86% 0.78% 0.88% 0.72% 1.10% For the Year Ended December 31, 2014 Commercial Real Estate Residential Real Estate Commercial Commercial Commercial Commercial Owner Residential Residential (Dollars in thousands) Business AD&C Investor R/E Occupied R/E Leasing Consumer Mortgage Construction Total Balance at beginning of year $ 6,308 $ 3,754 $ 9,263 $ 6,308 $ 16 $ 4,142 $ 7,819 $ 1,156 $ 38,766 Provision (credit) (1,204) 1,042 486 1,094 (7) 119 (1,385) (308) (163) Charge-offs (729) (529) (3) (265) - (834) (323) (4) (2,687) Recoveries 1,477 - 38 6 - 165 121 79 1,886 Net charge-offs 748 (529) 35 (259) - (669) (202) 75 (801) Balance at end of period $ 5,852 $ 4,267 $ 9,784 $ 7,143 $ 9 $ 3,592 $ 6,232 $ 923 $ 37,802 Total loans and leases $ 390,781 $ 205,124 $ 640,193 $ 611,061 $ 54 $ 425,552 $ 717,886 $ 136,741 $ 3,127,392 Allowance for loans and leases to total loans and leases ratio 1.50% 2.08% 1.53% 1.17% 16.80% 0.84% 0.87% 0.67% 1.21% Balance of loans specifically evaluated for impairment $ 3,894 $ 2,464 $ 10,279 $ 8,941 $ na. $ na. $ 3,535 $ 306 $ 29,419 Allowance for loans specifically evaluated for impairment $ 788 $ 741 $ 541 $ 824 $ na. $ na. $ - $ - $ 2,894 Specific allowance to specific loans ratio 20.24% 30.07% 5.26% 9.22% na. na. na. na. 9.84% Balance of loans collectively evaluated $ 386,887 $ 202,660 $ 629,914 $ 602,120 $ 54 $ 425,552 $ 714,351 $ 136,435 $ 3,097,973 Allowance for loans collectively evaluated $ 5,064 $ 3,526 $ 9,243 $ 6,319 $ 9 $ 3,592 $ 6,232 $ 923 $ 34,908 Collective allowance to collective loans ratio 1.31% 1.74% 1.47% 1.05% 16.80% 0.84% 0.87% 0.68% 1.13% The following table provides summary information regarding impaired loans at the dates indicated and for the periods then ended: (In thousands) June 30, 2015 December 31, 2014 Impaired loans with a specific allowance $ 9,661 $ 11,411 Impaired loans without a specific allowance 19,033 18,008 Total impaired loans $ 28,694 $ 29,419 Allowance for loan and lease losses related to impaired loans $ 2,886 $ 2,894 Allowance for loan and lease losses related to loans collectively evaluated 35,827 34,908 Total allowance for loan and lease losses $ 38,713 $ 37,802 Average impaired loans for the period $ 28,769 $ 34,331 Contractual interest income due on impaired loans during the period $ 1,326 $ 2,339 Interest income on impaired loans recognized on a cash basis $ 324 $ 773 Interest income on impaired loans recognized on an accrual basis $ 122 $ 280 The following tables present the recorded investment with respect to impaired loans, the associated allowance by the applicable portfolio segment and the principal balance of the impaired loans prior to amounts charged-off at the dates indicated: June 30, 2015 Commercial Real Estate Total Recorded Commercial All Investment in Commercial Commercial Owner Other Impaired (In thousands) Commercial AD&C Investor R/E Occupied R/E Loans Loans Impaired loans with a specific allowance Non-accruing $ 659 $ 57 $ 2,589 $ 4,561 $ - $ 7,866 Restructured accruing 881 - - - - 881 Restructured non-accruing 203 - 72 639 - 914 Balance $ 1,743 $ 57 $ 2,661 $ 5,200 $ - $ 9,661 Allowance $ 1,047 $ 58 $ 715 $ 1,066 $ - $ 2,886 Impaired loans without a specific allowance Non-accruing $ 1,013 $ - $ 7,362 $ 1,785 $ - $ 10,160 Restructured accruing 15 - 2,103 - 2,621 4,739 Restructured non-accruing 1,410 137 - 1,438 1,149 4,134 Balance $ 2,438 $ 137 $ 9,465 $ 3,223 $ 3,770 $ 19,033 Total impaired loans Non-accruing $ 1,672 $ 57 $ 9,951 $ 6,346 $ - $ 18,026 Restructured accruing 896 - 2,103 - 2,621 5,620 Restructured non-accruing 1,613 137 72 2,077 1,149 5,048 Balance $ 4,181 $ 194 $ 12,126 $ 8,423 $ 3,770 $ 28,694 Unpaid principal balance in total impaired loans $ 5,646 $ 4,456 $ 16,878 $ 10,271 $ 4,086 $ 41,337 June 30, 2015 Commercial Real Estate Total Recorded Commercial All Investment in Commercial Commercial Owner Other Impaired (In thousands) Commercial AD&C Investor R/E Occupied R/E Loans Loans Average impaired loans for the period $ 4,013 $ 1,340 $ 10,829 $ 8,779 $ 3,808 $ 28,769 Contractual interest income due on impaired loans during the period $ 207 $ 188 $ 469 $ 366 $ 96 Interest income on impaired loans recognized on a cash basis $ 93 $ 11 $ 15 $ 185 $ 20 Interest income on impaired loans recognized on an accrual basis $ 29 $ - $ 54 $ - $ 39 December 31, 2014 Commercial Real Estate Total Recorded Commercial All Investment in Commercial Commercial Owner Other Impaired (In thousands) Commercial AD&C Investor R/E Occupied R/E Loans Loans Impaired loans with a specific allowance Non-accruing $ 473 $ 1,330 $ 2,288 $ 5,013 $ - $ 9,104 Restructured accruing 687 - - - - 687 Restructured non-accruing 308 - 76 1,236 - 1,620 Balance $ 1,468 $ 1,330 $ 2,364 $ 6,249 $ - $ 11,411 Allowance $ 788 $ 741 $ 541 $ 824 $ - $ 2,894 Impaired loans without a specific allowance Non-accruing $ 1,115 $ - $ 5,792 $ 1,769 $ - $ 8,676 Restructured accruing 23 - 2,123 - 2,664 4,810 Restructured non-accruing 1,288 1,134 - 923 1,177 4,522 Balance $ 2,426 $ 1,134 $ 7,915 $ 2,692 $ 3,841 $ 18,008 Total impaired loans Non-accruing $ 1,588 $ 1,330 $ 8,080 $ 6,782 $ - $ 17,780 Restructured accruing 710 - 2,123 - 2,664 5,497 Restructured non-accruing 1,596 1,134 76 2,159 1,177 6,142 Balance $ 3,894 $ 2,464 $ 10,279 $ 8,941 $ 3,841 $ 29,419 Unpaid principal balance in total impaired loans $ 5,360 $ 7,044 $ 14,926 $ 10,729 $ 4,126 $ 42,185 December 31, 2014 Commercial Real Estate Total Recorded Commercial All Investment in Commercial Commercial Owner Other Impaired (In thousands) Commercial AD&C Investor R/E Occupied R/E Loans Loans Average impaired loans for the period $ 5,308 $ 3,651 $ 9,327 $ 8,963 $ 7,082 $ 34,331 Contractual interest income due on impaired loans during the period $ 311 $ 352 $ 730 $ 859 $ 87 Interest income on impaired loans recognized on a cash basis $ 252 $ 39 $ 78 $ 344 $ 60 Interest income on impaired loans recognized on an accrual basis $ 63 $ - $ 111 $ - $ 106 Credit Quality The following tables provide information on the credit quality of the loan portfolio by segment at the dates indicated: June 30, 2015 Commercial Real Estate Residential Real Estate Commercial Commercial Commercial Owner Residential Residential (In thousands) Commercial AD&C Investor R/E Occupied R/E Leasing Consumer Mortgage Construction Total Non-performing loans and assets: Non-accrual loans and leases $ 3,285 $ 194 $ 10,023 $ 8,423 $ - $ 1,214 $ 7,780 $ 780 $ 31,699 Loans and leases 90 days past due - - - - 2 7 - - 9 Restructured loans and leases 896 - 2,103 - - - 2,621 - 5,620 Total non-performing loans and leases 4,181 194 12,126 8,423 2 1,221 10,401 780 37,328 Other real estate owned 39 789 - - - 690 1,613 1,383 4,514 Total non-performing assets $ 4,220 $ 983 $ 12,126 $ 8,423 $ 2 $ 1,911 $ 12,014 $ 2,163 $ 41,842 December 31, 2014 Commercial Real Estate Residential Real Estate Commercial Commercial Commercial Owner Residential Residential (In thousands) Commercial AD&C Investor R/E Occupied R/E Leasing Consumer Mortgage Construction Total Non-performing loans and assets: Non-accrual loans and leases $ 3,184 $ 2,464 $ 8,156 $ 8,941 $ - $ 1,668 $ 3,012 $ 1,105 $ 28,530 Loans and leases 90 days past due - - - - - - - - - Restructured loans and leases 710 - 2,123 - - - 2,664 - 5,497 Total non-performing loans and leases 3,894 2,464 10,279 8,941 - 1,668 5,676 1,105 34,027 Other real estate owned 39 365 - - - - 1,408 1,383 3,195 Total non-performing assets $ 3,933 $ 2,829 $ 10,279 $ 8,941 $ - $ 1,668 $ 7,084 $ 2,488 $ 37,222 June 30, 2015 Commercial Real Estate Residential Real Estate Commercial Commercial Commercial Owner Residential Residential (In thousands) Commercial AD&C Investor R/E Occupied R/E Leasing Consumer Mortgage Construction Total Past due loans and leases 31-60 days $ 61 $ - $ 85 $ 609 $ - $ 1,307 $ 3,772 $ - $ 5,834 61-90 days - - 1,440 458 - 643 1,244 - 3,785 > 90 days - - - - 2 7 - - 9 Total past due 61 - 1,525 1,067 2 1,957 5,016 - 9,628 Non-accrual loans and leases 3,285 194 10,023 8,423 - 1,214 7,780 780 31,699 Loans acquired with deteriorated credit quality 1,198 - - 1,053 - - - - 2,251 Current loans 405,251 222,909 682,631 633,430 19 433,294 731,399 136,354 3,245,287 Total loans and leases $ 409,795 $ 223,103 $ 694,179 $ 643,973 $ 21 $ 436,465 $ 744,195 $ 137,134 $ 3,288,865 December 31, 2014 Commercial Real Estate Residential Real Estate Commercial Commercial Commercial Owner Residential Residential (In thousands) Commercial AD&C Investor R/E Occupied R/E Leasing Consumer Mortgage Construction Total Past due loans and leases 31-60 days $ 759 $ - $ 2,374 $ 2,658 $ 11 $ 797 $ 3,064 $ - $ 9,663 61-90 days 995 320 1,493 156 - 179 836 - 3,979 > 90 days - - - - - - - - - Total past due 1,754 320 3,867 2,814 11 976 3,900 - 13,642 Non-accrual loans and leases 3,184 2,464 8,156 8,941 - 1,668 3,012 1,105 28,530 Loans acquired with deteriorated credit quality 1,238 - - 1,773 - - - - 3,011 Current loans 384,605 202,340 628,170 597,533 43 422,908 710,974 135,636 3,082,209 Total loans and leases $ 390,781 $ 205,124 $ 640,193 $ 611,061 $ 54 $ 425,552 $ 717,886 $ 136,741 $ 3,127,392 The following tables provide information by credit risk rating indicators for each segment of the commercial loan portfolio at the dates indicated: June 30, 2015 Commercial Real Estate Commercial Commercial Commercial Owner (In thousands) Commercial AD&C Investor R/E Occupied R/E Total Pass $ 384,562 $ 220,747 $ 679,253 $ 616,435 $ 1,900,997 Special Mention 8,212 698 1,857 6,431 17,198 Substandard 17,021 1,658 13,069 21,107 52,855 Doubtful - - - - - Total $ 409,795 $ 223,103 $ 694,179 $ 643,973 $ 1,971,050 Decemeber 31, 2014 Commercial Real Estate Commercial Commercial Commercial Owner (In thousands) Commercial AD&C Investor R/E Occupied R/E Total Pass $ 366,367 $ 201,642 $ 621,511 $ 581,575 $ 1,771,095 Special Mention 8,835 698 3,931 7,669 21,133 Substandard 15,579 2,784 14,751 21,817 54,931 Doubtful - - - - - Total $ 390,781 $ 205,124 $ 640,193 $ 611,061 $ 1,847,159 Homogeneous loan pools do not have individual loans subjected to internal risk ratings therefore, the credit indicator applied to these pools is based on their delinquency status. The following tables provide information by credit risk rating indicators for those remaining segments of the loan portfolio at the dates indicated: June 30, 2015 Residential Real Estate Residential Residential (In thousands) Leasing Consumer Mortgage Construction Total Performing $ 19 $ 435,244 $ 733,794 $ 136,354 $ 1,305,411 Non-performing: 90 days past due 2 7 - - 9 Non-accruing - 1,214 7,780 780 9,774 Restructured loans and leases - - 2,621 - 2,621 Total $ 21 $ 436,465 $ 744,195 $ 137,134 $ 1,317,815 December 31, 2014 Residential Real Estate Residential Residential (In thousands) Leasing Consumer Mortgage Construction Total Performing $ 54 $ 423,884 $ 712,210 $ 135,636 $ 1,271,784 Non-performing: 90 days past due - - - - - Non-accruing - 1,668 3,012 1,105 5,785 Restructured loans and leases - - 2,664 - 2,664 Total $ 54 $ 425,552 $ 717,886 $ 136,741 $ 1,280,233 During the six months ended June 30, 2015 , the Company restructured $0.9 million in loan s . No modifications resulted in the redu ction of the principal in the associated loan balances. Restructured loans are subject to periodic credit reviews to determine the necessity and adequacy of a specific loan loss allowance based on the collectability of the recorded investment in the restructured loan. Loans r estructured during 201 5 have specific reserves of $0.4 million at June 30, 2015 . For the year ended December 31, 2014 , the Company restructured $1.6 million in loans. Modifications consisted principally of interest rate concessions and no modifications resulted in the reduction of the recorded investment in the associated loan balances. Loans restructured during 2014 had specific reserves of $0.1 million at December 31, 2014 . Commitments to lend additional funds on loans that have been restructured at June 30, 2015 and December 31, 2014 amounted to $0.3 milli on and $0.1 million, respectively. The following table provides the amounts of the restructured loans at the date of restructuring for specific segments of the loan portfolio during the period indicated: For the Six Months Ended June 30, 2015 Commercial Real Estate Commercial All Commercial Commercial Owner Other (In thousands) Commercial AD&C Investor R/E Occupied R/E Loans Total Troubled debt restructurings Restructured accruing $ 275 $ - $ - $ - $ - $ 275 Restructured non-accruing - - - 639 - 639 Balance $ 275 $ - $ - $ 639 $ - $ 914 Specific allowance $ 275 $ - $ - $ 149 $ - $ 424 Restructured and subsequently defaulted $ - $ - $ - $ - $ - $ - For the Year Ended December 31, 2014 Commercial Real Estate Commercial All Commercial Commercial Owner Other (In thousands) Commercial AD&C Investor R/E Occupied R/E Loans Total Troubled debt restructurings Restructured accruing $ 75 $ - $ 1,284 $ - $ - $ 1,359 Restructured non-accruing 92 192 - - - 284 Balance $ 167 $ 192 $ 1,284 $ - $ - $ 1,643 Specific allowance $ 99 $ - $ - $ - $ - $ 99 Restructured and subsequently defaulted $ - $ - $ - $ - $ - $ - Other Real Estate Owned Other real estate own ed totaled $4.5 million and $3.2 million at June 30, 2015 and December 31, 2014 , respectively . |