CREDIT QUALITY ASSESSMENT

6 Months Ended

Jun. 30, 2016

Credit Quality Assessment [Abstract]

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:

			Six Months Ended June 30,
(In thousands)			2016		2015
Balance at beginning of year			$	40,895	$	37,802
	Provision for loan and lease losses			4,193		1,815
	Loan and lease charge-offs			(2,272)		(1,837)
	Loan and lease recoveries			568		933
		Net charge-offs		(1,704)		(904)
Balance at period end			$	43,384	$	38,713

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 Six Months Ended June 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		Leasing		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)			767		354		1,478		91		-		(145)		1,660		(12)		4,193
Charge-offs			(185)		(48)		(197)		-		-		(508)		(1,334)		-		(2,272)
Recoveries			12		-		112		4		-		90		330		20		568
	Net charge-offs		(173)		(48)		(85)		4		-		(418)		(1,004)		20		(1,704)
Balance at end of period		$	7,123	$	4,997	$	11,833	$	8,079	$	-	$	2,893	$	7,557	$	902	$	43,384
Total loans and leases		$	451,711	$	285,585	$	824,252	$	700,599	$	-	$	447,149	$	820,618	$	142,710	$	3,672,624
Allowance for loans and leases to total loans and leases ratio			1.58%		1.75%		1.44%		1.15%		na.		0.65%		0.92%		0.63%		1.18%
Balance of loans specifically evaluated for impairment		$	5,517	$	137	$	9,720	$	6,424	$	na.	$	na.	$	3,322	$	-	$	25,120
Allowance for loans specifically evaluated for impairment		$	1,951	$	-	$	1,274	$	553	$	na.	$	na.	$	-	$	-	$	3,778
Specific allowance to specific loans ratio			35.36%		0.00%		13.11%		8.61%		na.		na.		na.		na.		15.04%
Balance of loans collectively evaluated		$	446,194	$	285,448	$	814,532	$	694,175	$	na.	$	447,149	$	817,296	$	142,710	$	3,647,504
Allowance for loans collectively evaluated		$	5,172	$	4,997	$	10,559	$	7,526	$	na.	$	2,893	$	7,557	$	902	$	39,606
Collective allowance to collective loans ratio			1.16%		1.75%		1.30%		1.08%		na.		0.65%		0.92%		0.63%		1.09%

		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 loans and leases to total loans and leases 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)		June 30, 2016		December 31, 2015
Impaired loans with a specific allowance		$	12,018	$	14,208
Impaired loans without a specific allowance			13,102		14,719
	Total impaired loans	$	25,120	$	28,927
Allowance for loan and lease losses related to impaired loans		$	3,778	$	3,375
Allowance for loan and lease losses related to loans collectively evaluated			39,606		37,520
	Total allowance for loan and lease losses	$	43,384	$	40,895
Average impaired loans for the period		$	27,840	$	29,828
Contractual interest income due on impaired loans during the period		$	1,099	$	2,527
Interest income on impaired loans recognized on a cash basis		$	507	$	961
Interest income on impaired loans recognized on an accrual basis		$	119	$	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:

			June 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	$	1,559	$	-	$	7,161	$	1,733	$	-	$	10,453
		Restructured accruing		841		-		-		-		-		841
		Restructured non-accruing		85		-		-		639		-		724
	Balance		$	2,485	$	-	$	7,161	$	2,372	$	-	$	12,018
	Allowance		$	1,951	$	-	$	1,274	$	553	$	-	$	3,778
Impaired loans without a specific allowance
		Non-accruing	$	1,189	$	-	$	658	$	1,985	$	-	$	3,832
		Restructured accruing		413		-		852		746		568		2,579
		Restructured non-accruing		1,430		137		1,049		1,321		2,754		6,691
	Balance		$	3,032	$	137	$	2,559	$	4,052	$	3,322	$	13,102
Total impaired loans
		Non-accruing	$	2,748	$	-	$	7,819	$	3,718	$	-	$	14,285
		Restructured accruing		1,254		-		852		746		568		3,420
		Restructured non-accruing		1,515		137		1,049		1,960		2,754		7,415
	Balance		$	5,517	$	137	$	9,720	$	6,424	$	3,322	$	25,120
Unpaid principal balance in total impaired loans			$	7,791	$	4,398	$	14,387	$	8,785	$	4,001	$	39,362

	June 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	$	5,289	$	159	$	10,035	$	6,967	$	5,390	$	27,840
Contractual interest income due on impaired loans during the period	$	278	$	144	$	384	$	207	$	86
Interest income on impaired loans recognized on a cash basis	$	72	$	-	$	10	$	404	$	21
Interest income on impaired loans recognized on an accrual basis	$	65	$	-	$	15	$	18	$	21

			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, 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	$	4,714	$	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:

		June 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		Leasing		Consumer		Mortgage		Construction		Total
Non-performing loans and assets:
	Non-accrual loans and leases	$	4,263	$	137	$	8,868	$	5,678	$	-	$	2,600	$	6,186	$	202	$	27,934
	Loans and leases 90 days past due		-		-		-		-		-		2		-		-		2
	Restructured loans and leases		1,254		-		852		746		-		-		568		-		3,420
Total non-performing loans and leases			5,517		137		9,720		6,424		-		2,602		6,754		202		31,356
	Other real estate owned		39		365		433		-		-		-		474		-		1,311
Total non-performing assets		$	5,556	$	502	$	10,153	$	6,424	$	-	$	2,602	$	7,228	$	202	$	32,667

		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		Leasing		Consumer		Mortgage		Construction		Total
Non-performing loans and assets:
	Non-accrual loans and leases	$	3,696	$	194	$	8,368	$	6,340	$	-	$	2,193	$	8,822	$	418	$	30,031
	Loans and leases 90 days past due		-		-		-		-		-		-		-		-		-
	Restructured loans and leases		1,577		-		2,073		240		-		-		577		-		4,467
Total non-performing loans and leases			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

			June 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		Leasing		Consumer		Mortgage		Construction		Total
Past due loans and leases
	31-60 days		$	569	$	-	$	226	$	573	$	-	$	1,010	$	4,899	$	-	$	7,277
	61-90 days			858		-		-		1,407		-		931		2,787		-		5,983
	> 90 days			-		-		-		-		-		2		-		-		2
		Total past due		1,427		-		226		1,980		-		1,943		7,686		-		13,262
	Non-accrual loans and leases			4,263		137		8,868		5,678		-		2,600		6,186		202		27,934
	Loans acquired with deteriorated credit quality			542		-		-		265		-		-		-		-		807
	Current loans			445,479		285,448		815,158		692,676		-		442,606		806,746		142,508		3,630,621
		Total loans and leases	$	451,711	$	285,585	$	824,252	$	700,599	$	-	$	447,149	$	820,618	$	142,710	$	3,672,624

			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		Leasing		Consumer		Mortgage		Construction		Total
Past due loans and leases
	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 and leases			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 and leases	$	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:

		June 30, 2016
				Commercial Real Estate
								Commercial
				Commercial		Commercial		Owner
(In thousands)		Commercial		AD&C		Investor R/E		Occupied R/E		Total
	Pass	$	428,399	$	285,448	$	813,148	$	684,548	$	2,211,543
	Special Mention		7,665		-		913		3,676		12,254
	Substandard		15,647		137		10,191		12,375		38,350
	Doubtful		-		-		-		-		-
Total		$	451,711	$	285,585	$	824,252	$	700,599	$	2,262,147

		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:

			June 30, 2016
							Residential Real Estate
							Residential		Residential
(In thousands)			Leasing		Consumer		Mortgage		Construction		Total
	Performing		$	-	$	444,547	$	813,864	$	142,508	$	1,400,919
	Non-performing:
		90 days past due		-		2		-		-		2
		Non-accruing		-		2,600		6,186		202		8,988
		Restructured loans and leases		-		-		568		-		568
Total			$	-	$	447,149	$	820,618	$	142,710	$	1,410,477

			December 31, 2015
							Residential Real Estate
							Residential		Residential
(In thousands)			Leasing		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 and leases		-		-		577		-		577
Total			$	-	$	450,875	$	796,358	$	129,281	$	1,376,514

During the six months ended June 30, 2016, the Company restructured $0.6 million in loans. No modifications resulted in the reduction 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 restructured during 2016have specific reserves that were insignificant at June 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 modifications 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 restructured at June 30, 2016 and December 31, 2015 amounted to $0.2 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 Six Months Ended June 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	$	-	$	-	$	507	$	-	$	549
	Restructured non-accruing		21		-		-		-		-		21
Balance		$	63	$	-	$	-	$	507	$	-	$	570
Specific allowance		$	60	$	-	$	-	$	-	$	-	$	60
Restructured and subsequently defaulted		$	-	$	-	$	-	$	-	$	-	$	-

		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 owned totaled $1.3 million and $2.7 million at June 30, 2016 and December 31, 2015, respectively.