CREDIT QUALITY ASSESSMENT

3 Months Ended

Mar. 31, 2020

Credit Quality Assessment [Abstract]

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 not 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.