CREDIT QUALITY ASSESSMENT | Note 4 – CREDIT QUALITY ASSESSMENT Allowance for Loan Losses Summary information on t he allowance for loan loss activity for the period indicated is provided in the following table: Nine Months Ended September 30, (In thousands) 2016 2015 Balance at beginning of year $ 40,895 $ 37,802 Provision for loan losses 4,974 3,521 Loan charge-offs (2,586) (2,753) Loan recoveries 659 1,091 Net charge-offs (1,927) (1,662) Balance at period end $ 43,942 $ 39,661 The following tables provide information on the activity in t he allowance for loan losses by the respective loan portfolio segment for the period indicated: For the Nine Months Ended September 30, 2016 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 Consumer Mortgage Construction Total Balance at beginning of year $ 6,529 $ 4,691 $ 10,440 $ 7,984 $ 3,456 $ 6,901 $ 894 $ 40,895 Provision (credit) 635 456 1,435 253 81 2,132 (18) 4,974 Charge-offs (289) (48) (197) - (674) (1,378) - (2,586) Recoveries 21 22 124 5 111 350 26 659 Net charge-offs (268) (26) (73) 5 (563) (1,028) 26 (1,927) Balance at end of period $ 6,896 $ 5,121 $ 11,802 $ 8,242 $ 2,974 $ 8,005 $ 902 $ 43,942 Total loans and leases $ 444,129 $ 302,522 $ 847,946 $ 736,744 $ 450,113 $ 854,055 $ 144,998 $ 3,780,507 Allowance for loans losses to total loans ratio 1.55% 1.69% 1.39% 1.12% 0.66% 0.94% 0.62% 1.16% Balance of loans specifically evaluated for impairment $ 5,343 $ 137 $ 9,189 $ 6,336 $ na. $ 3,292 $ - $ 24,297 Allowance for loans specifically evaluated for impairment $ 1,884 $ - $ 1,256 $ 512 $ na. $ - $ - $ 3,652 Specific allowance to specific loans ratio 35.26% 0.00% 13.67% 8.08% na. na. na. 15.03% Balance of loans collectively evaluated $ 438,786 $ 302,385 $ 838,757 $ 730,408 $ 450,113 $ 850,763 $ 144,998 $ 3,756,210 Allowance for loans collectively evaluated $ 5,012 $ 5,121 $ 10,546 $ 7,730 $ 2,974 $ 8,005 $ 902 $ 40,290 Collective allowance to collective loans ratio 1.14% 1.69% 1.26% 1.06% 0.66% 0.94% 0.62% 1.07% For the Year Ended December 31,2015 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) 508 583 727 1,881 (5) 619 1,138 (80) 5,371 Charge-offs (306) (739) (91) (1,043) (4) (998) (614) - (3,795) Recoveries 475 580 20 3 - 243 145 51 1,517 Net charge-offs 169 (159) (71) (1,040) (4) (755) (469) 51 (2,278) Balance at end of period $ 6,529 $ 4,691 $ 10,440 $ 7,984 $ - $ 3,456 $ 6,901 $ 894 $ 40,895 Total loans and leases $ 465,765 $ 255,980 $ 719,084 $ 678,027 $ - $ 450,875 $ 796,358 $ 129,281 $ 3,495,370 Allowance for loan losses to total loans ratio 1.40% 1.83% 1.45% 1.18% na. 0.77% 0.87% 0.69% 1.17% Balance of loans specifically evaluated for impairment $ 5,273 $ 194 $ 10,441 $ 6,580 $ na. $ na. $ 6,439 $ - $ 28,927 Allowance for loans specifically evaluated for impairment $ 1,318 $ 58 $ 1,489 $ 510 $ na. $ na. $ - $ - $ 3,375 Specific allowance to specific loans ratio 25.00% 29.90% 14.26% 7.75% na. na. na. na. 11.67% Balance of loans collectively evaluated $ 460,492 $ 255,786 $ 708,643 $ 671,447 $ na. $ 450,875 $ 789,919 $ 129,281 $ 3,466,443 Allowance for loans collectively evaluated $ 5,211 $ 4,633 $ 8,951 $ 7,474 $ na. $ 3,456 $ 6,901 $ 894 $ 37,520 Collective allowance to collective loans ratio 1.13% 1.81% 1.26% 1.11% na. 0.77% 0.87% 0.69% 1.08% The following table provides summary information regarding impaired loans at the dates indicated and for the periods then ended: (In thousands) September 30, 2016 December 31, 2015 Impaired loans with a specific allowance $ 12,116 $ 14,208 Impaired loans without a specific allowance 12,181 14,719 Total impaired loans $ 24,297 $ 28,927 Allowance for loan losses related to impaired loans $ 3,652 $ 3,375 Allowance for loan losses related to loans collectively evaluated 40,290 37,520 Total allowance for loan losses $ 43,942 $ 40,895 Average impaired loans for the period $ 26,955 $ 29,828 Contractual interest income due on impaired loans during the period $ 1,793 $ 2,527 Interest income on impaired loans recognized on a cash basis $ 709 $ 961 Interest income on impaired loans recognized on an accrual basis $ 153 $ 274 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, 2016 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 $ 1,507 $ - $ 7,142 $ 1,911 $ - $ 10,560 Restructured accruing 833 - - - - 833 Restructured non-accruing 84 - - 639 - 723 Balance $ 2,424 $ - $ 7,142 $ 2,550 $ - $ 12,116 Allowance $ 1,884 $ - $ 1,256 $ 512 $ - $ 3,652 Impaired loans without a specific allowance Non-accruing $ 1,148 $ - $ 525 $ 1,754 $ - $ 3,427 Restructured accruing 370 - - 745 564 1,679 Restructured non-accruing 1,401 137 1,522 1,287 2,728 7,075 Balance $ 2,919 $ 137 $ 2,047 $ 3,786 $ 3,292 $ 12,181 Total impaired loans Non-accruing $ 2,655 $ - $ 7,667 $ 3,665 $ - $ 13,987 Restructured accruing 1,203 - - 745 564 2,512 Restructured non-accruing 1,485 137 1,522 1,926 2,728 7,798 Balance $ 5,343 $ 137 $ 9,189 $ 6,336 $ 3,292 $ 24,297 Unpaid principal balance in total impaired loans $ 7,262 $ 4,398 $ 13,864 $ 8,751 $ 3,984 $ 38,259 September 30, 2016 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 $ 5,303 $ 154 $ 9,823 $ 6,809 $ 4,866 $ 26,955 Contractual interest income due on impaired loans during the period $ 418 $ 219 $ 578 $ 361 $ 217 Interest income on impaired loans recognized on a cash basis $ 114 $ - $ 20 $ 471 $ 104 Interest income on impaired loans recognized on an accrual basis $ 93 $ - $ - $ 28 $ 32 December 31, 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 $ 1,168 $ 58 $ 7,791 $ 3,519 $ - $ 12,536 Restructured accruing 876 - - - - 876 Restructured non-accruing 156 - - 640 - 796 Balance $ 2,200 $ 58 $ 7,791 $ 4,159 $ - $ 14,208 Allowance $ 1,318 $ 58 $ 1,489 $ 510 $ - $ 3,375 Impaired loans without a specific allowance Non-accruing $ 974 $ - $ 518 $ 793 $ 2,750 $ 5,035 Restructured accruing 701 - 2,073 240 577 3,591 Restructured non-accruing 1,398 136 59 1,388 3,112 6,093 Balance $ 3,073 $ 136 $ 2,650 $ 2,421 $ 6,439 $ 14,719 Total impaired loans Non-accruing $ 2,142 $ 58 $ 8,309 $ 4,312 $ 2,750 $ 17,571 Restructured accruing 1,577 - 2,073 240 577 4,467 Restructured non-accruing 1,554 136 59 2,028 3,112 6,889 Balance $ 5,273 $ 194 $ 10,441 $ 6,580 $ 6,439 $ 28,927 Unpaid principal balance in total impaired loans $ 7,158 $ 4,456 $ 15,138 $ 8,555 $ 7,154 $ 42,461 December 31, 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 $ 4,714 $ 882 $ 11,145 $ 8,218 $ 4,869 $ 29,828 Contractual interest income due on impaired loans during the period $ 450 $ 304 $ 918 $ 647 $ 208 Interest income on impaired loans recognized on a cash basis $ 273 $ 11 $ 226 $ 347 $ 104 Interest income on impaired loans recognized on an accrual basis $ 113 $ - $ 107 $ 11 $ 43 Credit Quality The following tables provide information on the credit quality of the loan portfolio by segment at the dates indicated: September 30, 2016 Commercial Real Estate Residential Real Estate Commercial Commercial Commercial Owner Residential Residential (In thousands) Commercial AD&C Investor R/E Occupied R/E Consumer Mortgage Construction Total Non-performing loans and assets: Non-accrual loans $ 4,140 $ 137 $ 9,189 $ 5,591 $ 2,726 $ 7,321 $ 199 $ 29,303 Loans 90 days past due 163 - - - - - - 163 Restructured loans 1,203 - - 745 - 564 - 2,512 Total non-performing loans 5,506 137 9,189 6,336 2,726 7,885 199 31,978 Other real estate owned 39 365 395 - - 475 - 1,274 Total non-performing assets $ 5,545 $ 502 $ 9,584 $ 6,336 $ 2,726 $ 8,360 $ 199 $ 33,252 December 31, 2015 Commercial Real Estate Residential Real Estate Commercial Commercial Commercial Owner Residential Residential (In thousands) Commercial AD&C Investor R/E Occupied R/E Consumer Mortgage Construction Total Non-performing loans and assets: Non-accrual loans $ 3,696 $ 194 $ 8,368 $ 6,340 $ 2,193 $ 8,822 $ 418 $ 30,031 Loans 90 days past due - - - - - - - - Restructured loans 1,577 - 2,073 240 - 577 - 4,467 Total non-performing loans 5,273 194 10,441 6,580 2,193 9,399 418 34,498 Other real estate owned 39 365 433 - 690 1,215 - 2,742 Total non-performing assets $ 5,312 $ 559 $ 10,874 $ 6,580 $ 2,883 $ 10,614 $ 418 $ 37,240 September 30, 2016 Commercial Real Estate Residential Real Estate Commercial Commercial Commercial Owner Residential Residential (In thousands) Commercial AD&C Investor R/E Occupied R/E Consumer Mortgage Construction Total Past due loans 31-60 days $ 9,269 $ - $ 156 $ 2,901 $ 1,590 $ 5,567 $ - $ 19,483 61-90 days 381 - - 291 221 1,924 - 2,817 > 90 days 163 - - - - - - 163 Total past due 9,813 - 156 3,192 1,811 7,491 - 22,463 Non-accrual loans 4,140 137 9,189 5,591 2,726 7,321 199 29,303 Loans acquired with deteriorated credit quality 526 - - 244 - - - 770 Current loans 429,650 302,385 838,601 727,717 445,576 839,243 144,799 3,727,971 Total loans $ 444,129 $ 302,522 $ 847,946 $ 736,744 $ 450,113 $ 854,055 $ 144,998 $ 3,780,507 December 31, 2015 Commercial Real Estate Residential Real Estate Commercial Commercial Commercial Owner Residential Residential (In thousands) Commercial AD&C Investor R/E Occupied R/E Consumer Mortgage Construction Total Past due loans 31-60 days $ 119 $ - $ 616 $ 1,819 $ 1,642 $ 2,602 $ - $ 6,798 61-90 days 404 - 2,200 849 550 986 - 4,989 > 90 days - - - - - - - - Total past due 523 - 2,816 2,668 2,192 3,588 - 11,787 Non-accrual loans 3,696 194 8,368 6,340 2,193 8,822 418 30,031 Loans acquired with deteriorated credit quality 544 - - 307 - - - 851 Current loans 461,002 255,786 707,900 668,712 446,490 783,948 128,863 3,452,701 Total loans $ 465,765 $ 255,980 $ 719,084 $ 678,027 $ 450,875 $ 796,358 $ 129,281 $ 3,495,370 The following tables provide information by credit risk rating indicators for each segment of the commercial loan portfolio at the dates indicated: September 30, 2016 Commercial Real Estate Commercial Commercial Commercial Owner (In thousands) Commercial AD&C Investor R/E Occupied R/E Total Pass $ 421,297 $ 302,385 $ 837,403 $ 720,150 $ 2,281,235 Special Mention 9,511 - 902 4,392 14,805 Substandard 13,321 137 9,641 12,202 35,301 Doubtful - - - - - Total $ 444,129 $ 302,522 $ 847,946 $ 736,744 $ 2,331,341 December 31, 2015 Commercial Real Estate Commercial Commercial Commercial Owner (In thousands) Commercial AD&C Investor R/E Occupied R/E Total Pass $ 447,439 $ 255,786 $ 706,623 $ 659,281 $ 2,069,129 Special Mention 797 - 1,509 3,356 5,662 Substandard 17,529 194 10,952 15,390 44,065 Doubtful - - - - - Total $ 465,765 $ 255,980 $ 719,084 $ 678,027 $ 2,118,856 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, 2016 Residential Real Estate Residential Residential (In thousands) Consumer Mortgage Construction Total Performing $ 447,387 $ 846,170 $ 144,799 $ 1,438,356 Non-performing: 90 days past due - - - - Non-accruing 2,726 7,321 199 10,246 Restructured loans - 564 - 564 Total $ 450,113 $ 854,055 $ 144,998 $ 1,449,166 December 31, 2015 Residential Real Estate Residential Residential (In thousands) Consumer Mortgage Construction Total Performing $ 448,682 $ 786,959 $ 128,863 $ 1,364,504 Non-performing: 90 days past due - - - - Non-accruing 2,193 8,822 418 11,433 Restructured loans - 577 - 577 Total $ 450,875 $ 796,358 $ 129,281 $ 1,376,514 During the nine months ended September 30, 2016 , the Company restructured $0.6 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 2016 have specific reserves that were insignificant at September 30, 2016 . For the year ended December 31, 2015 , the Company restructured $1.9 million in loans. Modifications consisted principally of interest rate concessions and no mod ifications resulted in the reduction of the recorded investment in the associated loan balances. Loans restructured during 2015 had specific reserves of $0.5 million at December 31, 2015 . Commitments to lend additional funds on loans that have been re structured at September 30, 2016 and December 31, 2015 amounted to $0.1 million 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 Nine Months Ended September 30, 2016 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 $ 42 $ - $ - $ 508 $ - $ 550 Restructured non-accruing 20 - - - - 20 Balance $ 62 $ - $ - $ 508 $ - $ 570 Specific allowance $ 59 $ - $ - $ - $ - $ 59 Restructured and subsequently defaulted $ - $ - $ 479 $ - $ - $ 479 For the Year Ended December 31, 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 $ 1,003 $ - $ - $ 240 $ - $ 1,243 Restructured non-accruing - - - 639 - 639 Balance $ 1,003 $ - $ - $ 879 $ - $ 1,882 Specific allowance $ 303 $ - $ - $ 149 $ - $ 452 Restructured and subsequently defaulted $ - $ - $ - $ - $ - $ - Other Real Estate Owned Other real estate own ed totaled $1.3 million and $2.7 million at September 30, 2016 and December 31, 2015 , respectively . |