Credit Quality Assessment | Note 5 – CREDIT QUALITY ASSESSMENT The Company completed implementation of the CECL standard during the first quarter of 2020. The new guidance requires additional disclosures and introduces certain changes to definitions previously used under allowance for loan losses guidance. Accordingly, the following sections present separate disclosures compliant with the new and the legacy disclosure requirements. Allowance for Credit Losses Summary information on the allowance for credit loss activity for the period indicated is provided in the following table: Three Months Ended March 31, (In thousands) 2020 2019 Balance at beginning of period $ 56,132 $ 53,486 Initial allowance on purchased credit deteriorated loans at adoption of ASC 326 2,762 - Transition impact of adopting ASC 326 2,983 - Provision (credit) for credit losses 24,469 ( 128) Loan charge-offs ( 654) ( 356) Loan recoveries 108 87 Net charge-offs ( 546) ( 269) Balance at period end $ 85,800 $ 53,089 The following table provides summary information regarding collateral dependent loans individually evaluated for credit loss at the dates indicated: (In thousands) March 31, 2020 December 31, 2019 Collateral dependent loans individually evaluated for credit loss with an allowance $ 26,652 $ 15,333 Collateral dependent loans individually evaluated for credit loss without an allowance 11,023 9,440 Total individually evaluated collateral dependent loans $ 37,675 $ 24,773 Allowance for credit losses related to loans evaluated individually $ 8,643 $ 5,501 Allowance for credit losses related to loans evaluated collectively 77,157 50,631 Total allowance for credit losses $ 85,800 $ 56,132 The below section presents allowance for credit losses disclosures in line with the new CECL disclosure requirements. The following table provides information on the activity in the allowance for credit losses by the respective loan portfolio segment for the period indicated: For the Three Months Ended March 31, 2020 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 period $ 11,395 $ 7,590 $ 18,407 $ 6,884 $ 2,086 $ 8,803 $ 967 $ 56,132 Initial allowance on purchased credit deteriorated loans at adoption of ASC 326 1,549 - 1,114 - 99 - - 2,762 Transition impact of adopting ASC 326 2,988 2,576 ( 3,125) 387 820 ( 388) ( 275) 2,983 Provision for credit losses 13,506 1,042 3,454 2,839 1,349 1,810 469 24,469 Charge-offs ( 175) - - - ( 133) ( 346) - ( 654) Recoveries 67 - - - 26 13 2 108 Net recoveries (charge-offs) ( 108) - - - ( 107) ( 333) 2 ( 546) Balance at end of period $ 29,330 $ 11,208 $ 19,850 $ 10,110 $ 4,247 $ 9,892 $ 1,163 $ 85,800 Total loans $ 813,525 $ 643,114 $ 2,241,240 $ 1,305,682 $ 453,346 $ 1,116,512 $ 149,573 $ 6,722,992 Allowance for credit losses to total loans ratio 3.61% 1.74% 0.89% 0.77% 0.94% 0.89% 0.78% 1.28% Balance of loans individually evaluated for credit loss $ 11,560 $ 829 $ 18,545 $ 4,074 $ 1,313 $ 1,354 $ - $ 37,675 Allowance related to loans evaluated individually $ 5,659 $ 132 $ 2,704 $ 49 $ 99 $ - $ - $ 8,643 Individual allowance to loans evaluated individually ratio 48.95% 15.92% 14.58% 1.20% 7.54% 0.00% - 22.94% Balance of loans collectively evaluated for credit loss $ 801,965 $ 642,285 $ 2,222,695 $ 1,301,608 $ 452,033 $ 1,115,158 $ 149,573 $ 6,685,317 Allowance related to loans evaluated collectively $ 23,671 $ 11,076 $ 17,146 $ 10,061 $ 4,148 $ 9,892 $ 1,163 $ 77,157 Collective allowance to loans evaluated collectively ratio 2.95% 1.72% 0.77% 0.77% 0.92% 0.89% 0.78% 1.15% The following table presents collateral dependent loans individually evaluated for credit loss with the associated allowances for credit losses by the applicable portfolio segment: March 31, 2020 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 Loans individually evaluated for credit loss with an allowance Non-accruing $ 7,967 $ 829 $ 14,443 $ 760 $ 99 $ - $ - $ 24,098 Restructured accruing 579 - - - - - - 579 Restructured non-accruing 1,107 - 749 119 - - - 1,975 Balance $ 9,653 $ 829 $ 15,192 $ 879 $ 99 $ - $ - $ 26,652 Allowance $ 5,659 $ 132 $ 2,704 $ 49 $ 99 $ - $ - $ 8,643 Loans individually evaluated for credit loss without an allowance Non-accruing $ 362 $ - $ 2,578 $ 1,486 $ 850 $ 7 $ - $ 5,283 Restructured accruing 147 - 775 - - 1,074 - 1,996 Restructured non-accruing 1,398 - - 1,709 364 273 - 3,744 Balance $ 1,907 $ - $ 3,353 $ 3,195 $ 1,214 $ 1,354 $ - $ 11,023 Total individually evaluated loans Non-accruing $ 8,329 $ 829 $ 17,021 $ 2,246 $ 949 $ 7 $ - $ 29,381 Restructured accruing 726 - 775 - - 1,074 - 2,575 Restructured non-accruing 2,505 - 749 1,828 364 273 - 5,719 Balance $ 11,560 $ 829 $ 18,545 $ 4,074 $ 1,313 $ 1,354 $ - $ 37,675 Total unpaid contractual principal balance $ 14,450 $ 829 $ 24,373 $ 6,037 $ 1,583 $ 2,747 $ - $ 50,019 The following table presents average principal balance of the total non-accrual loans, contractual interest due and interest income recognized on a cash basis on non-accrual loans for the periods indicated below: March 31, 2020 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 Average non-accrual loans for the period $ 10,912 $ 829 $ 17,876 $ 4,111 $ 5,348 $ 12,470 $ - $ 51,546 Contractual interest income due on non-accrual loans during the period $ 230 $ 13 $ 415 $ 111 $ 91 $ 172 $ - $ 1,032 Interest income on non-accrual loans recognized on a cash basis $ 39 $ - $ 179 $ 39 $ 24 $ 91 $ - $ 372 Loans designated as non-accrual have all previously accrued but unpaid interest reversed from interest income. During the three months ended March 31, 2020 new loans placed on non-accrual status totaled $ 2.4 million and the related amount of reversed uncollected accrued interest was insignificant. The below section presents historical allowance for loan losses disclosures in line with the legacy disclosure requirements. The following table provides information on the activity in the allowance for loan losses by the respective loan portfolio segment for the period indicated: For the Year Ended December 31, 2019 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 period $ 11,377 $ 5,944 $ 17,603 $ 6,307 $ 2,113 $ 8,881 $ 1,261 $ 53,486 Provision (credit) 1,164 1,418 788 577 565 474 ( 302) 4,684 Charge-offs ( 1,195) - - - ( 783) ( 690) - ( 2,668) Recoveries 49 228 16 - 191 138 8 630 Net recoveries (charge-offs) ( 1,146) 228 16 - ( 592) ( 552) 8 ( 2,038) Balance at end of period $ 11,395 $ 7,590 $ 18,407 $ 6,884 $ 2,086 $ 8,803 $ 967 $ 56,132 Total loans $ 801,019 $ 684,010 $ 2,169,156 $ 1,288,677 $ 466,764 $ 1,149,327 $ 146,279 $ 6,705,232 Allowance for loan losses to total loans ratio 1.42% 1.11% 0.85% 0.53% 0.45% 0.77% 0.66% 0.84% Balance of loans specifically evaluated for impairment $ 8,867 $ 829 $ 9,212 $ 4,148 na. $ 1,717 $ - $ 24,773 Allowance for loans specifically evaluated for impairment $ 3,817 $ 132 $ 1,529 $ 23 na. $ - $ - $ 5,501 Specific allowance to specific loans ratio 43.05% - 16.60% 0.55% na. - - 22.21% Balance of loans collectively evaluated $ 789,613 $ 683,181 $ 2,150,400 $ 1,284,529 $ 465,771 $ 1,147,602 $ 146,279 $ 6,667,375 Allowance for loans collectively evaluated $ 7,578 $ 7,458 $ 16,878 $ 6,861 $ 2,086 $ 8,803 $ 967 $ 50,631 Collective allowance to collective loans ratio 0.96% 1.09% 0.78% 0.53% 0.45% 0.77% 0.66% 0.76% Balance of loans acquired with deteriorated credit quality $ 2,539 $ - $ 9,544 $ - $ 993 $ 8 $ - $ 13,084 Allowance for loans acquired with deteriorated credit quality $ - $ - $ - $ - $ - $ - $ - $ - Allowance to loan acquired with deteriorated credit quality ratio - - - - - - - - The following tables present the recorded investment with respect to impaired loans, the associated allowance by the applicable portfolio segment and the unpaid contractual principal balance of the impaired loans: December 31, 2019 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 $ 5,608 $ 829 $ 5,448 $ 767 $ - $ 12,652 Restructured accruing 266 - - - - 266 Restructured non-accruing 1,856 - 437 122 - 2,415 Balance $ 7,730 $ 829 $ 5,885 $ 889 $ - $ 15,333 Allowance $ 3,817 $ 132 $ 1,529 $ 23 $ - $ 5,501 Impaired loans without a specific allowance Non-accruing $ 114 $ - $ 2,552 $ 1,522 $ - $ 4,188 Restructured accruing 151 - 775 - 1,444 2,370 Restructured non-accruing 872 - - 1,737 273 2,882 Balance $ 1,137 $ - $ 3,327 $ 3,259 $ 1,717 $ 9,440 Total impaired loans Non-accruing $ 5,722 $ 829 $ 8,000 $ 2,289 $ - $ 16,840 Restructured accruing 417 - 775 - 1,444 2,636 Restructured non-accruing 2,728 - 437 1,859 273 5,297 Balance $ 8,867 $ 829 $ 9,212 $ 4,148 $ 1,717 $ 24,773 Unpaid principal balance in total impaired loans $ 11,296 $ 829 $ 13,805 $ 6,072 $ 2,618 $ 34,620 December 31, 2019 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 $ 7,781 $ 2,052 $ 7,565 $ 4,390 $ 1,577 $ 23,365 Contractual interest income due on impaired loans during the period $ 648 $ 127 $ 786 $ 258 $ 128 Interest income on impaired loans recognized on a cash basis $ 221 $ - $ 49 $ 187 $ 8 Interest income on impaired loans recognized on an accrual basis $ 62 $ - $ 39 $ - $ 68 Credit Quality The following section provides information on the credit quality of loan portfolio under the new CECL disclosure requirements: March 31, 2020 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 Analysis of Non-accrual Loan Activity: Balance at beginning of period $ 8,450 $ 829 $ 8,437 $ 4,148 $ 4,107 $ 12,661 $ - $ 38,632 Purchased credit deteriorated loans designated as non-accrual (1) 2,539 - 9,544 - 993 8 - 13,084 Loans placed on non-accrual 1,001 - - - 748 620 - 2,369 Non-accrual balances transferred to OREO - - - - - - - - Non-accrual balances charged-off ( 175) - - - ( 54) ( 346) - ( 575) Net payments or draws ( 981) - ( 211) ( 74) ( 176) ( 418) - ( 1,860) Non-accrual loans brought current - - - - ( 22) ( 254) - ( 276) Balance at end of period $ 10,834 $ 829 $ 17,770 $ 4,074 $ 5,596 $ 12,271 $ - $ 51,374 (1) Upon the adoption of CECL standard, the Company transitioned from closed pool level accounting for PCI loans during the first quarter of 2020. Non-accrual loans are determined based on the individual loan level and aggregated for reporting. March 31, 2020 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 Performing loans: Current $ 798,856 $ 632,929 $ 2,208,163 $ 1,298,353 $ 443,320 $ 1,082,513 $ 148,102 $ 6,612,236 31-60 days 2,671 9,356 13,521 3,255 3,126 16,324 - 48,253 61-90 days 438 - 1,011 - 1,304 4,322 1,471 8,546 Total performing loans 801,965 642,285 2,222,695 1,301,608 447,750 1,103,159 149,573 6,669,035 Non-performing loans: Non-accrual loans 10,834 829 17,770 4,074 5,596 12,271 - 51,374 Loans greater than 90 days past due - - - - - 8 - 8 Restructured loans 726 - 775 - - 1,074 - 2,575 Total non-performing loans 11,560 829 18,545 4,074 5,596 13,353 - 53,957 Total loans $ 813,525 $ 643,114 $ 2,241,240 $ 1,305,682 $ 453,346 $ 1,116,512 $ 149,573 $ 6,722,992 The following table provides information about credit quality indicators by the year of origination: March 31, 2020 Term Loans by Origination Year Revolving (In thousands) 2020 2019 2018 2017 2016 Prior Loans Total Commercial: Pass $ 43,565 $ 106,211 $ 133,570 $ 70,396 $ 38,508 $ 80,786 $ 325,583 $ 798,619 Special Mention - 701 26 379 304 633 499 2,542 Substandard 322 1,104 3,384 1,082 2,166 2,835 1,471 12,364 Doubtful - - - - - - - - Total $ 43,887 $ 108,016 $ 136,980 $ 71,857 $ 40,978 $ 84,254 $ 327,553 $ 813,525 Commercial AD&C: Pass $ 119,146 $ 237,288 $ 189,046 $ 54,654 $ 2,901 $ 2,404 $ 36,845 $ 642,284 Special Mention - - - - - - - - Substandard - - 730 100 - - - 830 Doubtful - - - - - - - - Total $ 119,146 $ 237,288 $ 189,776 $ 54,754 $ 2,901 $ 2,404 $ 36,845 $ 643,114 Commercial Investor R/E: Pass $ 169,448 $ 580,249 $ 319,063 $ 304,598 $ 361,218 $ 470,582 $ 14,839 $ 2,219,997 Special Mention - 883 980 257 - 342 - 2,462 Substandard 347 2,658 - - 112 15,664 - 18,781 Doubtful - - - - - - - - Total $ 169,795 $ 583,790 $ 320,043 $ 304,855 $ 361,330 $ 486,588 $ 14,839 $ 2,241,240 Commercial Owner Occupied R/E: Pass $ 88,082 $ 254,565 $ 179,210 $ 226,489 $ 212,350 $ 333,170 $ 1,313 $ 1,295,179 Special Mention - 1,050 878 - - 333 - 2,261 Substandard - 988 454 1,176 400 5,224 - 8,242 Doubtful - - - - - - - - Total $ 88,082 $ 256,603 $ 180,542 $ 227,665 $ 212,750 $ 338,727 $ 1,313 $ 1,305,682 Consumer: Beacon score: 660-850 $ 627 $ 7,093 $ 7,477 $ 3,462 $ 3,342 $ 21,332 $ 361,325 $ 404,658 600-659 108 771 167 185 1,039 5,748 14,705 22,723 540-599 1 69 153 236 795 3,126 5,993 10,373 less than 540 56 1,072 282 413 594 3,720 9,455 15,592 Total $ 792 $ 9,005 $ 8,079 $ 4,296 $ 5,770 $ 33,926 $ 391,478 $ 453,346 Residential Mortgage: Beacon score: 660-850 $ 19,705 $ 50,503 $ 191,761 $ 236,191 $ 171,471 $ 317,518 $ - $ 987,149 600-659 202 11,096 14,850 13,690 10,053 22,938 - 72,829 540-599 171 1,883 5,062 1,645 4,628 13,289 - 26,678 less than 540 92 1,445 6,793 2,818 2,444 16,264 - 29,856 Total $ 20,170 $ 64,927 $ 218,466 $ 254,344 $ 188,596 $ 370,009 $ - $ 1,116,512 Residential Construction: Beacon score: 660-850 $ 23,564 $ 72,488 $ 41,516 $ 5,660 $ 1,968 $ - $ - $ 145,196 600-659 741 3,356 280 - - - - 4,377 540-599 - - - - - - - - less than 540 - - - - - - - - Total $ 24,305 $ 75,844 $ 41,796 $ 5,660 $ 1,968 $ - $ - $ 149,573 The following section provides historical information on the credit quality of the loan portfolio under the legacy disclosure requirements: December 31, 2019 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 $ 8,450 $ 829 $ 8,437 $ 4,148 $ 4,107 $ 12,661 $ - $ 38,632 Loans 90 days past due - - - - - - - - Restructured loans 417 - 775 - 364 1,080 - 2,636 Total non-performing loans 8,867 829 9,212 4,148 4,471 13,741 - 41,268 Other real estate owned 39 665 409 - 64 305 - 1,482 Total non-performing assets $ 8,906 $ 1,494 $ 9,621 $ 4,148 $ 4,535 $ 14,046 $ - $ 42,750 December 31, 2019 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 $ 908 $ - $ 932 $ 316 $ 2,697 $ 14,853 $ 280 $ 19,986 61-90 days 370 - - - 1,517 4,541 1,334 7,762 > 90 days - - - - - - - - Total past due 1,278 - 932 316 4,214 19,394 1,614 27,748 Non-accrual loans 8,450 829 8,437 4,148 4,107 12,661 - 38,632 Loans acquired with deteriorated credit quality 2,539 - 9,544 - 993 8 - 13,084 Current loans 788,752 683,181 2,150,243 1,284,213 457,450 1,117,264 144,665 6,625,768 Total loans $ 801,019 $ 684,010 $ 2,169,156 $ 1,288,677 $ 466,764 $ 1,149,327 $ 146,279 $ 6,705,232 December 31, 2019 Commercial Real Estate Commercial Commercial Commercial Owner (In thousands) Commercial AD&C Investor R/E Occupied R/E Total Pass $ 783,909 $ 683,181 $ 2,146,971 $ 1,278,337 $ 4,892,398 Special Mention 2,487 - 3,189 2,284 7,960 Substandard 14,623 829 18,996 8,056 42,504 Doubtful - - - - - Total $ 801,019 $ 684,010 $ 2,169,156 $ 1,288,677 $ 4,942,862 December 31, 2019 Residential Real Estate Residential Residential (In thousands) Consumer Mortgage Construction Total Performing $ 462,293 $ 1,135,586 $ 146,279 $ 1,744,158 Non-performing: 90 days past due - - - - Non-accruing 4,107 12,661 - 16,768 Restructured loans 364 1,080 - 1,444 Total $ 466,764 $ 1,149,327 $ 146,279 $ 1,762,370 During the three months ended March 31, 2020, the Company restructured $ 1.4 million in loans that were designated as troubled debt restructurings. Restructured loans are subject to periodic credit reviews to determine the necessity and adequacy of an individual loan loss allowance based on the collectability of the recorded investment in the restructured loan. Loans restructured during the three months ended March 31, 2020 had individual reserves of $ 0.2 million. For the year ended December 31, 2019, the Company restructured $ 2.4 million in loans. Loans restructured during 2019 had individual reserves of $ 0.4 million at December 31, 2019. During both the three months ended March 31, 2020 and for the year ended December 31, 2019 modifications consisted principally of interest rate concessions, and did t result in the reduction of the recorded investment in the associated loan balances. The commitments to lend additional funds on loans that have been restructured at March 31, 2020 and December 31, 2019 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 Three Months Ended March 31, 2020 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 $ 322 $ - $ - $ - $ - $ 322 Restructured non-accruing - - 347 760 - 1,107 Balance $ 322 $ - $ 347 $ 760 $ - $ 1,429 Specific allowance $ 80 $ - $ 60 $ 40 $ - $ 180 Restructured and subsequently defaulted $ - $ - $ - $ - $ - $ - For the Year Ended December 31, 2019 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 $ 170 $ - $ 775 $ - $ 364 $ 1,309 Restructured non-accruing 261 - 789 - - 1,050 Balance $ 431 $ - $ 1,564 $ - $ 364 $ 2,359 Specific allowance $ 196 $ - $ 205 $ - $ - $ 401 Restructured and subsequently defaulted $ - $ - $ - $ - $ - $ - Other Real Estate Owned Other real estate owned totaled $ 1.4 million and $ 1.5 million at March 31, 2020 and December 31, 2019, respectively. There were noconsumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of March 31, 2020. |