CREDIT QUALITY ASSESSMENT | Note 5 – 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: Six Months Ended June 30, (In thousands) 2018 2017 Balance at beginning of year $ 45,257 $ 44,067 Provision for loan losses 3,730 1,516 Loan charge-offs (818) (824) Loan recoveries 324 320 Net charge-offs (494) (504) Balance at period end $ 48,493 $ 45,079 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 Six Months Ended June 30, 2018 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 $ 8,711 $ 3,501 $ 14,970 $ 7,178 $ 2,383 $ 7,268 $ 1,246 $ 45,257 Provision (credit) 1,033 688 2,000 (740) 327 (144) 566 3,730 Charge-offs (378) - - - (414) (26) - (818) Recoveries 129 62 16 - 71 35 11 324 Net recoveries (charge-offs) (249) 62 16 - (343) 9 11 (494) Balance at end of period $ 9,495 $ 4,251 $ 16,986 $ 6,438 $ 2,367 $ 7,133 $ 1,823 $ 48,493 Total loans $ 702,939 $ 609,266 $ 1,923,827 $ 1,184,421 $ 525,574 $ 1,106,674 $ 197,372 $ 6,250,073 Allowance for loans losses to total loans ratio 1.35% 0.70% 0.88% 0.54% 0.45% 0.64% 0.92% 0.78% Balance of loans specifically evaluated for impairment $ 7,668 $ 136 $ 5,878 $ 3,440 $ N/A $ 1,775 $ - $ 18,897 Allowance for loans specifically evaluated for impairment $ 3,123 $ - $ 1,255 $ 125 $ N/A $ - $ - $ 4,503 Specific allowance to specific loans ratio 40.73% - 21.35% 3.63% N/A - - 23.83% Balance of loans collectively evaluated $ 688,133 $ 609,130 $ 1,900,464 $ 1,178,689 $ 524,231 $ 1,104,887 $ 197,372 $ 6,202,906 Allowance for loans collectively evaluated $ 6,372 $ 4,251 $ 15,731 $ 6,313 $ 2,367 $ 7,133 $ 1,823 $ 43,990 Collective allowance to collective loans ratio 0.93% 0.70% 0.83% 0.54% 0.45% 0.65% 0.92% 0.71% Balance of loans acquired with deteriorated credit quality $ 7,138 $ - $ 17,485 $ 2,292 $ 1,343 $ 12 $ - $ 28,270 Allowance for loans acquired with deteriorated credit quality $ - $ - $ - $ - $ - $ - $ - $ - Allowance to loans acquired with deteriorated credit quality ratio - - - - - - - - For the Year Ended December 31,2017 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 $ 7,539 $ 4,652 $ 12,939 $ 7,885 $ 2,828 $ 7,261 $ 963 $ 44,067 Provision (credit) 2,616 (1,254) 1,930 (459) (57) (56) 257 2,977 Charge-offs (1,538) - - (248) (693) (87) - (2,566) Recoveries 94 103 101 - 305 150 26 779 Net recoveries (charge-offs) (1,444) 103 101 (248) (388) 63 26 (1,787) Balance at end of period $ 8,711 $ 3,501 $ 14,970 $ 7,178 $ 2,383 $ 7,268 $ 1,246 $ 45,257 Total loans $ 497,948 $ 292,443 $ 1,112,710 $ 857,196 $ 455,829 $ 921,435 $ 176,687 $ 4,314,248 Allowance for loan losses to total loans ratio 1.75% 1.20% 1.35% 0.84% 0.52% 0.79% 0.71% 1.05% Balance of loans specifically evaluated for impairment $ 8,105 $ 136 $ 5,575 $ 4,078 $ N/A $ 2,915 $ - $ 20,809 Allowance for loans specifically evaluated for impairment $ 3,220 $ - $ 663 $ 131 $ N/A $ - $ - $ 4,014 Specific allowance to specific loans ratio 39.73% - 11.89% 3.21% N/A - - 19.29% Balance of loans collectively evaluated $ 489,843 $ 292,307 $ 1,107,135 $ 853,118 $ 455,829 $ 918,520 $ 176,687 $ 4,293,439 Allowance for loans collectively evaluated $ 5,491 $ 3,501 $ 14,307 $ 7,047 $ 2,383 $ 7,268 $ 1,246 $ 41,243 Collective allowance to collective loans ratio 1.12% 1.20% 1.29% 0.83% 0.52% 0.79% 0.71% 0.96% The following table provides summary information regarding impaired loans at the dates indicated and for the periods then ended: (In thousands) June 30, 2018 December 31, 2017 Impaired loans with a specific allowance $ 11,829 $ 11,693 Impaired loans without a specific allowance 7,068 9,116 Total impaired loans $ 18,897 $ 20,809 Allowance for loan losses related to impaired loans $ 4,503 $ 4,014 Allowance for loan losses related to loans collectively evaluated 43,990 41,243 Total allowance for loan losses $ 48,493 $ 45,257 Average impaired loans for the period $ 20,166 $ 23,179 Contractual interest income due on impaired loans during the period $ 1,298 $ 2,314 Interest income on impaired loans recognized on a cash basis $ 302 $ 754 Interest income on impaired loans recognized on an accrual basis $ 64 $ 169 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, 2018 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 $ 3,493 $ - $ 5,157 $ - $ - $ 8,650 Restructured accruing 342 - - - - 342 Restructured non-accruing 2,059 - - 778 - 2,837 Balance $ 5,894 $ - $ 5,157 $ 778 $ - $ 11,829 Allowance $ 3,123 $ - $ 1,255 $ 125 $ - $ 4,503 Impaired loans without a specific allowance Non-accruing $ 307 $ - $ 721 $ 1,101 $ - $ 2,129 Restructured accruing 443 - - - 878 1,321 Restructured non-accruing 1,024 136 - 1,561 897 3,618 Balance $ 1,774 $ 136 $ 721 $ 2,662 $ 1,775 $ 7,068 Total impaired loans Non-accruing $ 3,800 $ - $ 5,878 $ 1,101 $ - $ 10,779 Restructured accruing 785 - - - 878 1,663 Restructured non-accruing 3,083 136 - 2,339 897 6,455 Balance $ 7,668 $ 136 $ 5,878 $ 3,440 $ 1,775 $ 18,897 Unpaid principal balance in total impaired loans $ 10,755 $ 1,248 $ 10,476 $ 5,774 $ 2,646 $ 30,899 June 30, 2018 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 $ 7,906 $ 136 $ 5,755 $ 3,842 $ 2,527 $ 20,166 Contractual interest income due on impaired loans during the period $ 531 $ 184 $ 317 $ 189 $ 77 Interest income on impaired loans recognized on a cash basis $ 100 $ - $ 13 $ 83 $ 106 Interest income on impaired loans recognized on an accrual basis $ 38 $ - $ - $ - $ 26 December 31, 2017 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 $ 4,516 $ - $ 5,157 $ - $ - $ 9,673 Restructured accruing 1,129 - - - - 1,129 Restructured non-accruing 108 - - 783 - 891 Balance $ 5,753 $ - $ 5,157 $ 783 $ - $ 11,693 Allowance $ 3,220 $ - $ 663 $ 131 $ - $ 4,014 Impaired loans without a specific allowance Non-accruing $ 391 $ - $ 418 $ 1,318 $ - $ 2,127 Restructured accruing 273 - - 496 890 1,659 Restructured non-accruing 1,688 136 - 1,481 2,025 5,330 Balance $ 2,352 $ 136 $ 418 $ 3,295 $ 2,915 $ 9,116 Total impaired loans Non-accruing $ 4,907 $ - $ 5,575 $ 1,318 $ - $ 11,800 Restructured accruing 1,402 - - 496 890 2,788 Restructured non-accruing 1,796 136 - 2,264 2,025 6,221 Balance $ 8,105 $ 136 $ 5,575 $ 4,078 $ 2,915 $ 20,809 Unpaid principal balance in total impaired loans $ 11,263 $ 1,248 $ 10,166 $ 6,331 $ 3,681 $ 32,689 December 31, 2017 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 $ 7,903 $ 137 $ 6,835 $ 5,336 $ 2,968 $ 23,179 Contractual interest income due on impaired loans during the period $ 828 $ 333 $ 669 $ 400 $ 84 Interest income on impaired loans recognized on a cash basis $ 204 $ - $ 24 $ 394 $ 132 Interest income on impaired loans recognized on an accrual basis $ 111 $ - $ - $ 26 $ 32 Credit Quality The following tables provide information on the credit quality of the loan portfolio by segment at the dates indicated: June 30, 2018 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 (1) $ 6,883 $ 136 $ 5,878 $ 3,440 $ 4,298 $ 6,251 $ 168 $ 27,054 Loans 90 days past due 6 - - 112 - - - 118 Restructured loans 785 - - - - 878 - 1,663 Total non-performing loans 7,674 136 5,878 3,552 4,298 7,129 168 28,835 Other real estate owned 39 365 497 - - 1,460 - 2,361 Total non-performing assets $ 7,713 $ 501 $ 6,375 $ 3,552 $ 4,298 $ 8,589 $ 168 $ 31,196 (1) Includes $1.4 million of consumer loans acquired from WashingtonFirst considered performing at the Acquisition Date. December 31, 2017 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 $ 6,703 $ 136 $ 5,575 $ 3,582 $ 2,967 $ 7,196 $ 177 $ 26,336 Loans 90 days past due - - - - - 225 - 225 Restructured loans 1,402 - - 496 - 890 - 2,788 Total non-performing loans 8,105 136 5,575 4,078 2,967 8,311 177 29,349 Other real estate owned 39 365 - 400 - 1,449 - 2,253 Total non-performing assets $ 8,144 $ 501 $ 5,575 $ 4,478 $ 2,967 $ 9,760 $ 177 $ 31,602 June 30, 2018 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 $ 744 $ 28 $ 2,995 $ 144 $ 3,492 $ 9,532 $ - $ 16,935 61-90 days 3,532 279 770 771 1,060 4,893 - 11,305 > 90 days 6 - - 112 - - - 118 Total past due 4,282 307 3,765 1,027 4,552 14,425 - 28,358 Non-accrual loans (1) 6,883 136 5,878 3,440 4,298 6,251 168 27,054 Loans acquired with deteriorated credit quality 7,138 - 17,485 2,292 1,343 12 - 28,270 Current loans 684,636 608,823 1,896,699 1,177,662 515,381 1,085,986 197,204 6,166,391 Total loans $ 702,939 $ 609,266 $ 1,923,827 $ 1,184,421 $ 525,574 $ 1,106,674 $ 197,372 $ 6,250,073 (1) Includes $1.4 million of consumer loans acquired from WashingtonFirst considered performing at the Acquisition Date. December 31, 2017 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 $ 587 $ - $ 775 $ 414 $ 2,107 $ 6,100 $ - $ 9,983 61-90 days - - - - 106 3,103 - 3,209 > 90 days - - - - - 225 - 225 Total past due 587 - 775 414 2,213 9,428 - 13,417 Non-accrual loans 6,703 136 5,575 3,582 2,967 7,196 177 26,336 Current loans 490,658 292,307 1,106,360 853,200 450,649 904,811 176,510 4,274,495 Total loans $ 497,948 $ 292,443 $ 1,112,710 $ 857,196 $ 455,829 $ 921,435 $ 176,687 $ 4,314,248 The following tables provide information by credit risk rating indicators for each segment of the commercial loan portfolio at the dates indicated: June 30, 2018 Commercial Real Estate Commercial Commercial Commercial Owner (In thousands) Commercial AD&C Investor R/E Occupied R/E Total Pass $ 679,208 $ 608,808 $ 1,896,995 $ 1,171,576 $ 4,356,587 Special Mention 3,574 322 3,469 5,296 12,661 Substandard 20,157 136 23,363 7,549 51,205 Doubtful - - - - - Total $ 702,939 $ 609,266 $ 1,923,827 $ 1,184,421 $ 4,420,453 December 31, 2017 Commercial Real Estate Commercial Commercial Commercial Owner (In thousands) Commercial AD&C Investor R/E Occupied R/E Total Pass $ 482,924 $ 292,307 $ 1,103,480 $ 845,102 $ 2,723,813 Special Mention 2,443 - 3,517 5,505 11,465 Substandard 12,581 136 5,713 6,589 25,019 Doubtful - - - - - Total $ 497,948 $ 292,443 $ 1,112,710 $ 857,196 $ 2,760,297 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, 2018 Residential Real Estate Residential Residential (In thousands) Consumer Mortgage Construction Total Performing $ 521,276 $ 1,099,545 $ 197,204 $ 1,818,025 Non-performing: 90 days past due - - - - Non-accruing (1) 4,298 6,251 168 10,717 Restructured loans - 878 - 878 Total $ 525,574 $ 1,106,674 $ 197,372 $ 1,829,620 (1) Includes $1.4 million of consumer loans acquired from WashingtonFirst considered performing at the Acquisition Date. December 31, 2017 Residential Real Estate Residential Residential (In thousands) Consumer Mortgage Construction Total Performing $ 452,862 $ 913,124 $ 176,510 $ 1,542,496 Non-performing: 90 days past due - 225 - 225 Non-accruing 2,967 7,196 177 10,340 Restructured loans - 890 - 890 Total $ 455,829 $ 921,435 $ 176,687 $ 1,553,951 During the six months ended June 30, 2018 , the Company restructured $1.6 million in loans that were designated as troubled debt restructurings . 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 the six months ended June 30, 2018 had specific reserves of $0.6 million . For the year ended December 31, 2017 , the Company restructured $2.1 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 2017 had specific reserves of $0.2 million at December 31, 2017 . The commitments to lend additional funds on loans that h ave been restructured at June 30, 2018 and December 31, 2017 were not significant. 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, 2018 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 $ - $ - $ - $ - $ - $ - Restructured non-accruing 1,464 - - 158 - 1,622 Balance $ 1,464 $ - $ - $ 158 $ - $ 1,622 Specific allowance $ 637 $ - $ - $ - $ - $ 637 Restructured and subsequently defaulted $ - $ - $ - $ - $ - $ - For the Year Ended December 31, 2017 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 $ 492 $ - $ - $ - $ - $ 492 Restructured non-accruing 1,019 - - 540 - 1,559 Balance $ 1,511 $ - $ - $ 540 $ - $ 2,051 Specific allowance $ 247 $ - $ - $ - $ - $ 247 Restructured and subsequently defaulted $ - $ - $ - $ - $ - $ - Other Real Estate Owned Other real estate owned totaled $2.4 million and $2.3 million at June 30, 2018 and December 31, 2017 , respectively . There were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of June 30, 2018 . |