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: Nine Months Ended September 30, (In thousands) 2015 2014 Balance at beginning of year $ 37,802 $ 38,766 Provision for loan and lease losses 3,521 (1,016) Loan and lease charge-offs (2,753) (1,541) Loan and lease recoveries 1,091 1,365 Net (charge-offs) recoveries (1,662) (176) Balance at period end $ 39,661 $ 37,574 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 Nine Months Ended September 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) 139 293 68 1,218 - 881 919 3 3,521 Charge-offs (185) (739) (90) (317) - (930) (492) - (2,753) Recoveries 226 580 15 2 - 144 103 21 1,091 Net charge-offs 41 (159) (75) (315) - (786) (389) 21 (1,662) Balance at end of period $ 6,032 $ 4,401 $ 9,777 $ 8,046 $ 9 $ 3,687 $ 6,762 $ 947 $ 39,661 Total loans and leases $ 423,855 $ 239,160 $ 710,694 $ 680,601 $ 19 $ 444,729 $ 773,889 $ 139,492 $ 3,412,439 Allowance for loans and leases to total loans and leases ratio 1.42% 1.84% 1.38% 1.18% 47.37% 0.83% 0.87% 0.68% 1.16% Balance of loans specifically evaluated for impairment $ 5,360 $ 194 $ 10,697 $ 8,172 $ na. $ na. $ 6,482 $ na. $ 30,905 Allowance for loans specifically evaluated for impairment $ 1,278 $ 57 $ 709 $ 958 $ na. $ na. $ - $ na. $ 3,002 Specific allowance to specific loans ratio 23.84% 29.38% 6.63% 11.72% na. na. na. na. 9.71% Balance of loans collectively evaluated $ 418,495 $ 238,966 $ 699,997 $ 672,429 $ 19 $ 444,729 $ 767,407 $ 139,492 $ 3,381,534 Allowance for loans collectively evaluated $ 4,754 $ 4,344 $ 9,068 $ 7,088 $ 9 $ 3,687 $ 6,762 $ 947 $ 36,659 Collective allowance to collective loans ratio 1.14% 1.82% 1.30% 1.05% 47.37% 0.83% 0.88% 0.68% 1.08% 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) September 30, 2015 December 31, 2014 Impaired loans with a specific allowance $ 9,654 $ 11,411 Impaired loans without a specific allowance 21,251 18,008 Total impaired loans $ 30,905 $ 29,419 Allowance for loan and lease losses related to impaired loans $ 3,002 $ 2,894 Allowance for loan and lease losses related to loans collectively evaluated 36,659 34,908 Total allowance for loan and lease losses $ 39,661 $ 37,802 Average impaired loans for the period $ 30,055 $ 34,331 Contractual interest income due on impaired loans during the period $ 2,016 $ 2,339 Interest income on impaired loans recognized on a cash basis $ 745 $ 773 Interest income on impaired loans recognized on an accrual basis $ 239 $ 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: September 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 $ 1,140 $ 57 $ 2,589 $ 4,139 $ - $ 7,925 Restructured accruing 863 - - - - 863 Restructured non-accruing 162 - 65 639 - 866 Balance $ 2,165 $ 57 $ 2,654 $ 4,778 $ - $ 9,654 Allowance $ 1,278 $ 57 $ 709 $ 958 $ - $ 3,002 Impaired loans without a specific allowance Non-accruing $ 999 $ - $ 5,955 $ 1,741 $ 2,750 $ 11,445 Restructured accruing 616 - 2,088 240 2,612 5,556 Restructured non-accruing 1,580 137 - 1,413 1,120 4,250 Balance $ 3,195 $ 137 $ 8,043 $ 3,394 $ 6,482 $ 21,251 Total impaired loans Non-accruing $ 2,139 $ 57 $ 8,544 $ 5,880 $ 2,750 $ 19,370 Restructured accruing 1,479 - 2,088 240 2,612 6,419 Restructured non-accruing 1,742 137 65 2,052 1,120 5,116 Balance $ 5,360 $ 194 $ 10,697 $ 8,172 $ 6,482 $ 30,905 Unpaid principal balance in total impaired loans $ 7,483 $ 4,456 $ 15,355 $ 10,076 $ 7,184 $ 44,554 September 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 $ 4,574 $ 1,054 $ 11,322 $ 8,628 $ 4,477 $ 30,055 Contractual interest income due on impaired loans during the period $ 353 $ 231 $ 685 $ 543 $ 204 Interest income on impaired loans recognized on a cash basis $ 197 $ 11 $ 132 $ 283 $ 122 Interest income on impaired loans recognized on an accrual basis $ 73 $ - $ 81 $ 9 $ 76 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: September 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 $ 3,881 $ 194 $ 8,609 $ 7,932 $ - $ 1,621 $ 7,488 $ 770 $ 30,495 Loans and leases 90 days past due - - - - 1 - - - 1 Restructured loans and leases 1,479 - 2,088 240 - - 2,612 - 6,419 Total non-performing loans and leases 5,360 194 10,697 8,172 1 1,621 10,100 770 36,915 Other real estate owned 39 365 38 - - 690 1,487 - 2,619 Total non-performing assets $ 5,399 $ 559 $ 10,735 $ 8,172 $ 1 $ 2,311 $ 11,587 $ 770 $ 39,534 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 September 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 $ 55 $ - $ 29 $ 401 $ - $ 1,973 $ 5,672 $ - $ 8,130 61-90 days 425 - 1,415 454 - 393 3,208 - 5,895 > 90 days - - - - 1 - - - 1 Total past due 480 - 1,444 855 1 2,366 8,880 - 14,026 Non-accrual loans and leases 3,881 194 8,609 7,932 - 1,621 7,488 770 30,495 Loans acquired with deteriorated credit quality 568 - - 1,003 - - - - 1,571 Current loans 418,926 238,966 700,641 670,811 18 440,742 757,521 138,722 3,366,347 Total loans and leases $ 423,855 $ 239,160 $ 710,694 $ 680,601 $ 19 $ 444,729 $ 773,889 $ 139,492 $ 3,412,439 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: September 30, 2015 Commercial Real Estate Commercial Commercial Commercial Owner (In thousands) Commercial AD&C Investor R/E Occupied R/E Total Pass $ 404,966 $ 238,965 $ 697,533 $ 659,219 $ 2,000,683 Special Mention 814 - 1,861 1,910 4,585 Substandard 18,075 195 11,300 19,472 49,042 Doubtful - - - - - Total $ 423,855 $ 239,160 $ 710,694 $ 680,601 $ 2,054,310 December 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: September 30, 2015 Residential Real Estate Residential Residential (In thousands) Leasing Consumer Mortgage Construction Total Performing $ 18 $ 443,108 $ 763,789 $ 138,722 $ 1,345,637 Non-performing: 90 days past due 1 - - - 1 Non-accruing - 1,621 7,488 770 9,879 Restructured loans and leases - - 2,612 - 2,612 Total $ 19 $ 444,729 $ 773,889 $ 139,492 $ 1,358,129 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 nine months ended September 30, 2015 , the Company restructured $2.3 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 September 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 September 30, 2015 and December 31, 2014 amounted to $0.5 milli on and $0.1 million, respectively. The following table provides the amounts of th e restructured loans for specific segments of the loan portfolio during the period indicated: For the Nine Months Ended September 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 $ 875 $ - $ - $ 240 $ - $ 1,115 Restructured non-accruing 543 - - 639 - 1,182 Balance $ 1,418 $ - $ - $ 879 $ - $ 2,297 Specific allowance $ 272 $ - $ - $ 149 $ - $ 421 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 $2.6 million and $3.2 million at September 30, 2015 and December 31, 2014 , respectively . |