Allowance For Loan Loss and Credit Quality Information

9 Months Ended

Sep. 30, 2011

Loans And Leases Receivables Impaired Abstract

Loans and Leases Receivable, Impaired, Description, Text Block

5. ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY INFORMATION

Allowance for Loan Losses

We maintain an allowance for loan losses and charge losses to this allowance when such losses are realized. The determination of the allowance for loan losses requires significant judgment reflecting our best estimate of impairment related to specifically identified loans as well as probable loan losses in the remaining loan portfolio. Our evaluation is based upon a continuing review of these portfolios.

The following table provides the activity of the allowance for loan losses and loan balances for the three and nine months ended September 30, 2011:


		Commercial
	Commercial	Mortgages	Construction	Residential	Consumer	Total
	(In Thousands)
Three months ended September 30, 2011
Allowance for loan losses
Beginning balance	$ 25,236	$ 12,330	$ 5,831	$ 3,707	$ 9,144	$ 56,248
Charge-offs	(1,431)	(5,302)	(1,107)	(877)	(1,248)	(9,965)
Recoveries	71	94	51	25	106	347
Provision	1,645	302	926	427	3,258	6,558
Ending balance	$ 25,521	$ 7,424	$ 5,701	$ 3,282	$ 11,260	$ 53,188

Nine months ended September 30, 2011
Allowance for loan losses
Beginning balance	$ 26,480	$ 10,564	$ 10,019	$ 4,028	$ 9,248	$ 60,339
Charge-offs	(7,641)	(6,609)	(8,179)	(2,183)	(5,472)	(30,084)
Recoveries	409	381	557	116	422	1,885
Provision	6,273	3,088	3,304	1,321	7,062	21,048
Ending balance	$ 25,521	$ 7,424	$ 5,701	$ 3,282	$ 11,260	$ 53,188

Period-end allowance allocated to:
Specific reserves(1)	$ 1,810	$ 1,604	$ 3,005	$ 808	$ 120	$ 7,347
General reserves(2)	23,711	5,820	2,696	2,474	11,140	45,841
Ending balance	$ 25,521	$ 7,424	$ 5,701	$ 3,282	$ 11,260	$ 53,188

Period-end loan balances evaluated for:
Specific reserves(1)	$ 21,270	$ 20,306	$ 21,701	$ 17,666	$ 3,176	$ 84,119	(3)
General reserves(2)	1,376,272	583,564	89,803	267,668	293,991	2,611,298
Ending balance	$ 1,397,542	$ 603,870	$ 111,504	$ 285,334	$ 297,167	$ 2,695,417


(1) Specific reserves represent loans individually evaluated for impairment
(2) General reserves represent loans collectively evaluated for impairment
(3) The difference between this amount and nonaccruing loans at September 30, 2011, represents accruing
troubled debt restructured loans.

Non-Accrual and Past Due Loans

The following tables show our nonaccrual and past due loans at the dates indicated:

					Greater Than		Total Past
	30–59 Days		60–89 Days		90 Days		Due		Accruing
September 30, 2011	Past Due and		Past Due and		Past Due and		And Still		Current		Nonaccrual		Total
(In Thousands)	Still Accruing		Still Accruing		Still Accruing		Accruing		Balances		Loans		Loans

Commercial	$ 1,774		$ 507		$ 894		$ 3,175		$ 1,372,997		$ 21,370		$ 1,397,542
Commercial
mortgages	967		-		73		1,040		581,955		20,875		603,870
Construction	359		-		-		359		89,444		21,701		111,504
Residential	4,332		2,483		562		7,377		267,386		10,571		285,334
Consumer	1,342		395		-		1,737		293,868		1,562		297,167

Total	$ 8,774		$ 3,385		$ 1,529		$ 13,688		$ 2,605,650		$ 76,079		$ 2,695,417
% of Total Loans	0.32	%	0.13	%	0.06	%	0.51	%	96.67	%	2.82	%	100	%

					Greater Than		Total Past
	30–59 Days		60–89 Days		90 Days		Due		Accruing
December 31, 2010	Past Due and		Past Due and		Past Due and		And Still		Current		Nonaccrual		Total
(In Thousands)	Still Accruing		Still Accruing		Still Accruing		Accruing		Balances		Loans		Loans
Commercial	$ 2,839		$ 384		$ -		$ 3,223		$ 1,213,246		$ 21,577		$ 1,238,046
Commercial mortgages	764		-		-		764		611,744		9,490		621,998
Construction	1,685		-		-		1,685		108,714		30,260		140,659
Residential	6,403		2,024		465		8,892		289,864		11,739		310,495
Consumer	1,355		163		-		1,518		305,290		3,701		310,509

Total	$ 13,046		$ 2,571		$ 465		$ 16,082		$ 2,528,858		$ 76,767		$ 2,621,707
% of Total Loans	0.49	%	0.10	%	0.02	%	0.61	%	96.46	%	2.93	%	100	%

Impaired Loans

The following tables provide an analysis of our impaired loans at September 30, 2011 and December 31, 2010:


	Ending	Loans with	Loans with	Related	Contractual	Average
September 30, 2011	Loan	No Specific	Specific	Specific	Principal	Loan
(In Thousands)	Balances	Reserve (1)	Reserve	Reserve	Balances	Balances

Commercial	$ 21,270	$ 18,381	$ 2,889	$ 1,810	$ 30,291	$ 22,196
Commercial mortgages	20,306	11,960	8,346	1,604	28,728	16,251
Construction	21,701	3,687	18,014	3,005	44,010	28,622
Residential	17,666	11,419	6,247	808	20,740	17,794
Consumer	3,176	1,880	1,296	120	3,728	4,240

Total	$ 84,119	$ 47,327	$ 36,792	$ 7,347	$ 127,497	$ 89,103


	Ending	Loans with	Loans with	Related	Contractual	Average
December 31, 2010	Loan	No Specific	Specific	Specific	Principal	Loan
(In Thousands)	Balances	Reserve (1)	Reserve	Reserve	Balances	Balances
Commercial	$ 21,527	$ 14,555	$ 6,972	$ 4,845	$ 29,309	$ 16,139
Commercial mortgages	9,490	3,263	6,227	2,591	12,001	4,530
Construction	30,260	12,166	18,094	3,485	53,265	36,102
Residential	17,441	11,226	6,215	968	22,112	16,667
Consumer	5,106	3,969	1,137	130	6,558	4,184

Total	$ 83,824	$ 45,179	$ 38,645	$ 12,019	$ 123,245	$ 77,622

(1) Reflects loan balances at their remaining book balance.

Interest income of $94,000 and $279,000 was recognized on impaired loans during the three and nine months ended September 30, 2011, respectively.

Credit Quality Indicators

Below is a description of each of our risk ratings for all commercial loans:

Pass. These assets presently show no current or potential problems and are considered fully collectible.

Special Mention. These assets do not currently expose the Bank to a sufficient degree of risk to warrant an adverse classification but do possess credit deficiencies or potential weaknesses deserving our close attention. Special mention assets have a potential weakness or pose an unwarranted financial risk which, if not corrected, could weaken the asset and increase risk in the future.

Substandard. Assets which are inadequately protected by the current net worth and paying capacity of the obligor or collateral, if any. Assets so classified have a well-defined weakness or weaknesses based upon objective evidence that jeopardizes the timely liquidation of the asset, or realization of the collateral at the asset's net book value. Substandard assets can be classified as accrual or nonaccrual and are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. The possibility of untimely liquidation requires a substandard classification even if there is little likelihood of total loss.

Doubtful. The rating designated to assets with all the weaknesses of substandard assets and added weaknesses that make collection in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values.

Loss. These assets are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that an asset has absolutely no recovery or salvage value, but rather, that it is not practical or desirable to defer writing off a mostly worthless asset even though partial recovery may occur in the future.

Residential and Consumer Loans

The residential and consumer loan portfolios are monitored on an ongoing basis using delinquency information and loan type as credit quality indicators. These credit quality indicators are assessed in the aggregate in these relatively homogeneous portfolios. Loans that are greater than 90 days past due are generally considered nonperforming and placed in nonaccrual status.

The following tables provide an analysis of problem loans as of September 30, 2011 and December 31, 2010:

Commercial credit exposure credit risk profile by internally assigned risk rating (in thousands):


	Commercial		Commercial Mortgages		Construction		Total Commercial
	Sept. 30, 2011	Dec. 31, 2010	Sept. 30, 2011	Dec. 31, 2010	Sept. 30, 2011	Dec. 31, 2010	September 30, 2011			December 31, 2010
	Sept. 30, 2011	Dec. 31, 2010	Sept. 30, 2011	Dec. 31, 2010	Sept. 30, 2011	Dec. 31, 2010	Amount	Percent		Amount	Percent
Risk Rating:
Special mention	$ 74,727	$ 39,544	$ 30,514	$ 13,195	$ 11,328	$ 21,970	$ 116,569			$ 74,709
Substandard:
Accrual	67,197	54,230	4,291	21,121	17,988	32,560	89,476			107,911
Nonaccrual	21,370	21,577	20,875	9,490	21,701	30,260	63,946			61,327
Total Special Mention and Substandard	163,294	115,351	55,680	43,806	51,017	84,790	269,991	13	%	243,947	12	%
Pass	1,234,248	1,122,695	548,190	578,192	60,487	55,869	1,842,925	87		1,756,756	88
Total Commercial Loans	$ 1,397,542	$ 1,238,046	$ 603,870	$ 621,998	$ 111,504	$ 140,659	$ 2,112,916	100	%	$ 2,000,703	100	%

Consumer credit exposure credit risk profile based on payment activity (in thousands):


	Residential			Consumer			Total Residential and Consumer
	Sept. 30, 2011		Dec.31, 2010	Sept. 30, 2011		Dec.31, 2010	September 30, 2011			December 31, 2010
	Sept. 30, 2011		Dec.31, 2010	Sept. 30, 2011		Dec.31, 2010	Amount	Percent		Amount	Percent

Nonperforming	$ 17,666	(1)	$ 17,441	$ 3,176	(1)	$ 5,106	$ 20,842	4	%	$ 22,547	4	%
Performing	267,668		293,054	293,991		305,403	561,659	96		598,457	96
Total	$ 285,334		$ 310,495	$ 297,167		$ 310,509	$ 582,501	100	%	$ 621,004	100	%

(1) Includes $8.7 million of troubled debt restructured mortgages and home equity installment loans performing
in accordance with modified terms and are accruing interest.

Troubled Debt Restructurings (TDR)

Effective July 1, 2011, we adopted the provisions of Accounting Standards Update No. 2011-02, A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring. As such, we reassessed all loan modifications occurring since January 1, 2011 for identification as TDRs, resulting in no newly identified TDRs.

The book balance of TDRs at September 30, 2011 and December 31, 2010 was $27.7 million and $12.0 million, respectively. The balances at September 30, 2011 include approximately $19.0 million of TDRs in nonaccrual status and $8.7 million of TDRs in accrual status compared to $4.9 million of TDRs in nonaccrual status and $7.1 million of TDRs in accrual status at December 31, 2010. Approximately $2.1 million and $1.3 million in specific reserves have been established for these loans as of September 30, 2011 and December 31, 2010, respectively.

During the nine months ending September 30, 2011, the terms of 27 loans were modified in troubled debt restructurings, of which 19 were related to commercial loans that were already placed on nonaccrual. Nonaccruing restructured loans remain in nonaccrual status until there has been a period of sustained repayment performance for a reasonable period, usually six months. The remaining eight loans represented residential and consumer loans. Our concessions on restructured loans consisted mainly of forbearance agreements, reduction in interest rates or extensions of maturities. Principal balances are generally not forgiven by us when a loan is modified as a TDR.

The following table presents loans identified as TDRs during the three and nine months ended September 30, 2011:

	Three	Nine
	Months Ended	Months Ended
	September 30,	September 30,
(In Thousands)	2011	2011

Commercial	$ 746	$ 1,352
Commercial mortgages	2,170	7,725
Construction	189	13,909
Residential	-	2,335
Consumer	146	146

Total	$ 3,251	$ 25,467

The troubled debt restructurings described above increased the allowance for loan losses by $1.2 million through allocation of a specific reserve, and resulted in charge offs of $10.3 million during the nine months ending September 30, 2011, most of which had been previously identified and reserved for in prior periods.

The following table summarizes TDRs which have defaulted (defined as past due 90 days) during the three and nine months ended September 30, 2011 that were restructured within the last twelve months prior to September 30, 2011:

		Three	Nine
		Months Ended	Months Ended
		September 30,	September 30,
(In Thousands)		2011	2011

Commercial	1	$ -	$ -
Commercial mortgages	1	-	-
Construction	1	-	-
Residential	1	162	162
Consumer	1	-	-

Total		$ 162	$ 162