CREDIT QUALITY ASSESSMENT

9 Months Ended

Sep. 30, 2016

Credit Quality Assessment [Abstract]

CREDIT QUALITY ASSESSMENT

Note 4 – CREDIT QUALITY ASSESSMENT

Allowance for Loan Losses

Summary information on the 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 the 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 millionin 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 insignificantat 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 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 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 owned totaled $1.3 million and $2.7 million at September 30, 2016 and December 31, 2015, respectively.