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Note 7 - Allowance for Credit Losses
 6 Months Ended
Jun. 30, 2011
Financing Receivables [Text Block]
Note 7. Allowance for Credit Losses. Following is a summary of activity in the allowance for credit losses for the periods indicated:

   
June 30,
2011
   
June 30,
2010
 
   
(In thousands)
 
Allowance for loan and lease losses at beginning of period
  $ 18,830     $ 13,504  
Allowance for unfunded commitments at beginning of period
    237       240  
Total allowance for credit losses at beginning of period
    19,067       13,744  
                 
Provision for loan and lease losses
    5,516       4,559  
Provision for unfunded commitments
    14       (69 )
                 
Loans charged-off:
               
Residential mortgage
    (121 )     (39 )
Commercial real estate
    (4,538 )     (6,961 )
Commercial construction
    (443 )     (1,695 )
Commercial non-real estate
    (19 )     (50 )
Commercial unsecured
    (90 )     (67 )
Lease receivables
    (18 )     (6 )
Consumer real estate
    (571 )     (1,262 )
Home equity lines of credit
    (96 )     (278 )
Consumer non-real estate
    (- )     (1 )
Consumer unsecured
    (52 )     (15 )
Total charge-offs
    (5,948 )     (10,374 )
Recoveries of loans previously charged-off:
            -  
Commercial real estate
    12       27  
Commercial construction
    108       151  
Commercial non-real estate
    13       39  
Commercial unsecured
    31       15  
Consumer real estate
    36       5  
Home equity lines of credit
    64       7  
Consumer non-real estate
    2       14  
Consumer unsecured
    3       4  
Total recoveries
    269       262  
                 
Net charge-offs
    (5,679 )     (10,112 )
                 
Allowance for loan and lease losses at end of period
    18,667       7,951  
Allowance for unfunded commitments at end of period
    251       171  
Total allowance for credit losses at end of period
  $ 18,918     $ 8,122  

The following table presents a roll forward of the Company’s allowance for loan and lease losses by loan category for the periods ended June 30, 2011 and December 31, 2010, respectively:

   
June 30, 2011
 
   
Beginning
   
Charge-
               
Ending
   
Total
 
   
Balance
   
Offs
   
Recoveries
   
Provisions
   
Balance
   
Loans
 
   
(In thousands)
 
Allowance for collectively
evaluated for impairment
                                   
Residential mortgage
  $ 358     $ (121 )   $ -     $ 460     $ 697     $ 57,411  
Commercial real estate
    10,718       (118 )     3       (969 )     9,634       317,473  
Commercial construction
    1,192       (28 )     3       (95 )     1,071       30,268  
Commercial non-real estate
    316       (- )     4       92       412       13,268  
Commercial unsecured
    74       (36 )     30       12       80       3,870  
Lease receivables
    148       (18 )     -       -       130       7,955  
Consumer real estate
    1,653       (11 )     18       (372 )     1,288       39,576  
Home equity lines of credit
    1,102       (66 )     63       (241 )     858       32,357  
Consumer non-real estate
    29       (- )     2       11       42       2,603  
Consumer unsecured
    52       (52 )     3       83       86       2,909  
Total
    15,642       (450 )     126       (1,019 )     14,299       507,690  
Allowance for individually
evaluated for impairment
                                               
Residential mortgage
    -       (- )     -       -       -       508  
Commercial real estate
    2,846       (4,420 )     9       4,730       3,165       67,959  
Commercial construction
    95       (415 )     105       546       331       8,389  
Commercial non-real estate
    19       (19 )     9       (9 )     -       1,736  
Commercial unsecured
    54       (54 )     1       447       448       852  
Consumer real estate
    91       (559 )     19       873       424       1,500  
Home equity lines of credit
    83       (31 )     -       (52 )     -       175  
Consumer non-real estate
    -       (- )     -       -       -       36  
Total
    3,188       (5,498 )     143       6,535       4,368       81,155  
                                                 
Grand Total
  $ 18,830     $ (5,948 )   $ 269     $ 5,516     $ 18,667     $ 588,845  

   
December 31, 2010
 
   
Beginning
   
Charge-
               
Ending
   
Total
 
   
Balance
   
Offs
   
Recoveries
   
Provisions
   
Balance
   
Loans
 
   
(In thousands)
 
Allowance for collectively
evaluated for impairment
                                   
Residential mortgage
  $ 377     $ (44 )   $ -     $ 25     $ 358     $ 56,503  
Commercial real estate
    6,192       (1,098 )     39       5,585       10,718       377,920  
Commercial construction
    712       (1,243 )     48       1,675       1,192       45,613  
Commercial non-real estate
    142       (107 )     61       220       316       16,210  
Commercial unsecured
    72       (216 )     23       195       74       4,637  
Lease receivables
    154       (6 )     -       -       148       8,148  
Consumer real estate
    428       (718 )     67       1,876       1,653       40,734  
Home equity lines of credit
    280       (328 )     10       1,140       1,102       35,313  
Consumer non-real estate
    14       (1 )     20       (4 )     29       2,884  
Consumer unsecured
    16       (49 )     9       76       52       2,965  
Total
    8,387       (3,810 )     277       10,788       15,642       590,927  
Allowance for individually
evaluated for impairment
                                               
Commercial real estate
    4,981       (10,406 )     219       8,052       2,846       31,153  
Commercial construction
    82       (1,500 )     380       1,133       95       1,914  
Commercial non-real estate
    -       (492 )     -       511       19       1,570  
Commercial unsecured
    54       (- )     -       -       54       64  
Consumer real estate
    -       (1,175 )     78       1,188       91       488  
Home equity lines of credit
    -       (400 )     -       483       83       84  
Consumer non-real estate
    -       (- )     -       -       -       11  
Total
    5,117       (13,973 )     677       11,367       3,188       35,284  
                                                 
Grand Total
  $ 13,504     $ (17,783 )   $ 954     $ 22,155     $ 18,830     $ 626,211  

Historical Loss and Qualitative Analysis. The assessment of the adequacy of the allowance for credit losses includes an analysis of actual historical loss percentages of both classified and pass loans and qualitative factors allocated among specific categories of loans.  In developing this analysis, the Bank relies on actual loss history for the most recent eight quarters and exercises management’s best judgment in assessing credit risk. There were no changes in the Company’s accounting policy and methodology used to estimate the allowance for credit losses during this reporting period. The following table sets forth information with respect to the Bank’s allocation of historical loss percentages used in determining the allowance for credit losses (ACL) for each of the loan categories and risk grades at June 30, 2011.

    
Historical Loss Percentage by Assigned Risk Grade
 
Category – Commercial Loans
 
9
   
8
   
7
   
6
   
5
   
4
   
3
   
2
   
1
 
Commercial Real Estate
    100.00 %     98.590 %     22.376 %     0.506 %     0.358 %     0.005 %     0.005 %     0.005 %     0.00 %
Commercial Non-Real Estate Secured
    100.00 %     98.660 %     19.625 %     11.269 %     1.379 %     0.096 %     0.096 %     0.096 %     0.00 %
Commercial Non-Real Estate Unsecured
    100.00 %     98.640 %     24.114 %     3.229 %     1.175 %     0.883 %     0.883 %     0.883 %     0.00 %
                                                                         
Category – Other Loans
 
9
   
8
   
7
   
6
   
Pass
                                 
Consumer Real Estate
    100.00 %     98.740 %     98.740 %     50.461 %     0.656 %                                
Consumer Non-Real Estate Secured
    100.00 %     98.740 %     98.740 %     98.740 %     0.120 %                                
Consumer Non-Real Estate Unsecured
    100.00 %     98.670 %     98.670 %     98.670 %     1.639 %                                
Residential Real Estate
    100.00 %     98.920 %     5.457 %     1.542 %     0.000 %                                
Lease Receivables
    100.00 %     98.700 %     11.808 %     0.000 %     0.050 %                                

Unfunded Commitments
     
Commercial Real Estate Lines of Credit
    0.200 %
Commercial Non-Real Estate Lines of Credit
    0.200 %
Commercial Standby Letters of Credit
    0.200 %
Home Equity Lines of Credit
    0.200 %
Consumer Real Estate Lines of Credit
    0.200 %
Consumer Non-Real Estate Lines of Credit
    0.200 %
Work-in-Process
    0.200 %

The following table sets forth information with respect to the Bank’s allocation of qualitative factors, including various subjective areas assessed in terms of basis points used in determining the overall adequacy of the ACL as of June 30, 2011. The determination of risk will result in a positive or negative adjustment to the ACL evaluation and validation. Adjustments for each component may range from -10 basis points to +15 basis points. A component score of 0 basis points indicates no effect on the ACL. A component rating of +15 basis points indicates the assessed maximum potential of increased risk to the adequacy of the ACL. A -10 basis point component rating indicates the most positive effect on the ACL.

   
Allocation of Qualitative Factors
 
Category
 
CML Real
Estate
   
CML Non
Real Estate
   
CML
Unsecured
   
Mortgage
 
Loans and Leases:
                       
Changes in Economic and Business Conditions
    0.15 %     0.14 %     0.14 %     0.10 %
Interest Rate Risk
    0.14 %     0.14 %     0.14 %     0.10 %
Effect of Concentrations of Credit
    0.15 %     0.13 %     0.14 %     0.10 %
Changes in Nature and Volume of the Loan Portfolio Mix
    0.15 %     0.14 %     0.14 %     0.10 %
Seasoning of the Loan Portfolio
    0.15 %     0.14 %     0.14 %     0.10 %
Changes in the Volume/Severity of Past Due Loans,  Nonaccrual Loans, and Classified Loans
    0.15 %     0.14 %     0.14 %     0.13 %
Changes in Lending Policies and Procedures
    0.12 %     0.12 %     0.12 %     0.12 %
Changes in the Quality of the Loan Review System
    0.12 %     0.12 %     0.12 %     0.11 %
Changes in Experience, Ability and Depth of Lending Management and Staff
    0.13 %     0.13 %     0.13 %     0.11 %
Changes in the Value of the Underlying Collateral
    0.15 %     0.14 %     0.15 %     0.11 %

   
Allocation of Qualitative Factors
 
Category
 
CNS Real
Estate
   
CNS Non
Real Estate
   
CNS
Unsecured
   
Leases
 
Loans and Leases:
                       
Changes in Economic and Business Conditions
    0.13 %     0.13 %     0.14 %     0.14 %
Interest Rate Risk
    0.13 %     0.13 %     0.14 %     0.13 %
Effect of Concentrations of Credit
    0.13 %     0.13 %     0.14 %     0.13 %
Changes in Nature and Volume of the Loan Portfolio Mix
    0.13 %     0.13 %     0.14 %     0.13 %
Seasoning of the Loan Portfolio
    0.13 %     0.13 %     0.14 %     0.15 %
Changes in the Volume/Severity of Past Due Loans, Nonaccrual Loans, and Classified Loans
    0.13 %     0.13 %     0.13 %     0.12 %
Changes in Lending Policies and Procedures
    0.11 %     0.11 %     0.11 %     0.12 %
Changes in the Quality of the Loan Review System
    0.11 %     0.11 %     0.11 %     0.12 %
Changes in Experience, Ability and Depth of Lending Management and Staff
    0.13 %     0.13 %     0.13 %     0.13 %
Changes in the Value of the Underlying Collateral
    0.13 %     0.13 %     0.15 %     0.13 %

Category
 
CML
Non
Real
Estate
   
CML
Real
Estate
   
CML
Line
of
Credit
   
Home
Equity
Line
   
CNS
Non
Real
Estate
   
CNS
Real
Estate
 
Unfunded Commitments:
                                   
Changes in Economic and Business Conditions
    0.03 %     0.03 %     0.02 %     0.04 %     0.02 %     0.01 %
Interest Rate Risk
    0.03 %     0.03 %     0.02 %     0.04 %     0.02 %     0.01 %
Effect of Concentrations of Credit
    0.02 %     0.02 %     0.02 %     0.02 %     0.02 %     0.01 %
Changes in Nature and Volume of the Loan Portfolio Mix
    0.02 %     0.02 %     0.02 %     0.02 %     0.02 %     0.01 %
Seasoning of the Loan Portfolio
    0.01 %     0.01 %     0.02 %     0.02 %     0.02 %     0.01 %
Changes in the Volume/Severity of Past Due Loans, Nonaccrual Loans, and Classified Loans
    0.03 %     0.03 %     0.03 %     0.03 %     0.02 %     0.01 %
Changes in Lending Policies and Procedures
    0.01 %     0.01 %     0.01 %     0.01 %     0.01 %     0.01 %
Changes in the Quality of the Loan Review System
    0.02 %     0.02 %     0.02 %     0.02 %     0.01 %     0.01 %
Changes in Experience, Ability and Depth of Lending Management and Staff
    0.01 %     0.02 %     0.02 %     0.02 %     0.01 %     0.01 %
Changes in the Value of the Underlying Collateral
    0.02 %     0.02 %     0.02 %     0.02 %     0.02 %     0.01 %