Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2012

Allowance for Loan and Lease Losses, Provision for Loss, Net [Abstract]

Allowance for loan losses by class of financing receivable and allowance

The Company provides for loan losses through the establishment of an allowance for loan losses which represents an estimated reserve for existing losses in the loan portfolio. A systematic methodology is used for determining the allowance that includes a quarterly review process, risk rating changes, and adjustments to the allowance. The loan portfolio is classified in eight segments and credit risk is evaluated separately in each segment. The appropriate level of the allowance is evaluated continually based on a review of significant loans, with a particular emphasis on nonaccruing, past due, and other loans that may require special attention. Other factors include general conditions in local and national economies; loan portfolio composition and asset quality indicators; and internal factors such as changes in underwriting policies, credit administration practices, experience, ability and depth of lending management, among others. The allowance consists of four elements: (1) specific reserves for loans evaluated individually for impairment; (2) general reserves for each portfolio segment based on historical loan loss experience, (3) qualitative reserves judgmentally adjusted for local and national economic conditions, concentrations, portfolio composition, volume and severity of delinquencies and nonaccrual loans, trends of criticized and classified loans, changes in credit policies, and underwriting standards, credit administration practices, and other factors as applicable for each portfolio segment; and (4) unallocated reserves. All outstanding loans are considered in evaluating the appropriateness of the allowance. A breakdown of the allowance for loan losses as of September 30, 2012, December 31, 2011, and September 30, 2011, by class of financing receivable and allowance element, is presented in the following tables:

As of September 30, 2012	Specific Reserves on Loans Evaluated Individually for Impairment		General Reserves on Loans Based on Historical Loss Experience		Reserves for Qualitative Factors		Unallocated Reserves		Total Reserves
Commercial
Real estate	$	1,416,000	$	2,479,000	$	1,800,000	$	-	$	5,695,000
Construction		696,000		210,000		153,000		-		1,059,000
Other		1,240,000		807,000		585,000		-		2,632,000
Municipal		-		-		18,000		-		18,000
Residential
Term		1,494,000		293,000		436,000		-		2,223,000
Construction		-		5,000		9,000		-		14,000
Home equity line of credit		215,000		238,000		337,000		-		790,000
Consumer		1,000		317,000		230,000		-		548,000
Unallocated		-		-		-		1,760,000		1,760,000
	$	5,062,000	$	4,349,000	$	3,568,000	$	1,760,000	$	14,739,000

As of December 31, 2011	Specific Reserves on Loans Evaluated Individually for Impairment		General Reserves on Loans Based on Historical Loss Experience		Reserves for Qualitative Factors		Unallocated Reserves		Total Reserves
Commercial
Real estate	$	808,000	$	2,578,000	$	2,273,000	$	-	$	5,659,000
Construction		33,000		332,000		293,000		-		658,000
Other		402,000		883,000		778,000		-		2,063,000
Municipal		-		-		19,000		-		19,000
Residential
Term		478,000		222,000		459,000		-		1,159,000
Construction		235,000		6,000		14,000		-		255,000
Home equity line of credit		91,000		149,000		355,000		-		595,000
Consumer		11,000		331,000		242,000		-		584,000
Unallocated		-		-		-		2,008,000		2,008,000
	$	2,058,000	$	4,501,000	$	4,433,000	$	2,008,000	$	13,000,000

As of September 30, 2011	Specific Reserves on Loans Evaluated Individually for Impairment		General Reserves on Loans Based on Historical Loss Experience		Reserves for Qualitative Factors		Unallocated Reserves		Total Reserves
Commercial
Real estate	$	636,000	$	2,547,000	$	4,273,000	$	-	$	7,456,000
Construction		-		300,000		504,000		-		804,000
Other		352,000		952,000		1,597,000		-		2,901,000
Municipal		-		-		19,000		-		19,000
Residential
Term		398,000		553,000		493,000		-		1,444,000
Construction		82,000		20,000		18,000		-		120,000
Home equity line of credit		95,000		130,000		349,000		-		574,000
Consumer		64,000		313,000		238,000		-		615,000
Unallocated		-		-		-		1,386,000		1,386,000
	$	1,627,000	$	4,815,000	$	7,491,000	$	1,386,000	$	15,319,000

Summary of Risk Ratings for Loans

The following table summarizes the risk ratings for the Company's commercial real estate, commercial construction, commercial other, and municipal loans as of September 30, 2012:

	Commercial Real Estate		Commercial Construction		Commercial Other		Municipal Loans		All Risk- Rated Loans
1 Strong	$	20,000	$	-	$	279,000	$	1,775,000	$	2,074,000
2 Above Average		18,918,000		699,000		5,426,000		8,651,000		33,694,000
3 Satisfactory		36,580,000		643,000		13,497,000		3,523,000		54,243,000
4 Average		105,150,000		10,670,000		30,688,000		2,499,000		149,007,000
5 Watch		39,494,000		1,812,000		19,100,000		-		60,406,000
6 OAEM		21,530,000		1,227,000		3,731,000		-		26,488,000
7 Substandard		34,359,000		6,854,000		10,916,000		-		52,129,000
8 Doubtful		480,000		-		66,000		-		546,000
Total	$	256,531,000	$	21,905,000	$	83,703,000	$	16,448,000	$	378,587,000

The following table summarizes the risk ratings for the Company's commercial real estate, commercial construction, commercial other, and municipal loans as of December 31, 2011:

	Commercial Real Estate		Commercial Construction		Commercial Other		Municipal Loans		All Risk- Rated Loans
1 Strong	$	23,000	$	-	$	465,000	$	2,158,000	$	2,646,000
2 Above Average		21,334,000		-		4,229,000		7,509,000		33,072,000
3 Satisfactory		33,119,000		1,365,000		10,981,000		3,861,000		49,326,000
4 Average		106,171,000		17,125,000		31,600,000		2,693,000		157,589,000
5 Watch		44,215,000		3,287,000		17,893,000		-		65,395,000
6 OAEM		18,309,000		2,320,000		5,303,000		-		25,932,000
7 Substandard		31,575,000		7,323,000		16,362,000		-		55,260,000
8 Doubtful		678,000		1,154,000		149,000		-		1,981,000
Total	$	255,424,000	$	32,574,000	$	86,982,000	$	16,221,000	$	391,201,000

The following table summarizes the risk ratings for the Company's commercial real estate, commercial construction, commercial other, and municipal loans as of September 30, 2011:

	Commercial Real Estate		Commercial Construction		Commercial Other		Municipal Loans		All Risk- Rated Loans
1 Strong	$	28,000	$	-	$	351,000	$	2,214,000	$	2,593,000
2 Above Average		20,546,000		10,000		3,444,000		10,930,000		34,930,000
3 Satisfactory		36,693,000		1,665,000		14,408,000		3,896,000		56,662,000
4 Average		113,350,000		14,564,000		35,808,000		2,813,000		166,535,000
5 Watch		40,518,000		5,222,000		15,235,000		-		60,975,000
6 OAEM		14,964,000		4,007,000		4,522,000		-		23,493,000
7 Substandard		31,811,000		4,877,000		22,271,000		-		58,959,000
8 Doubtful		-		-		6,000		-		6,000
Total	$	257,910,000	$	30,345,000	$	96,045,000	$	19,853,000	$	404,153,000

Allowance for Loan Losses Transactions

The following table presents allowance for loan losses activity by class for the nine-months and quarter ended September 30, 2012, and allowance for loan loss balances by class and related loan balances by class as of September 30, 2012:

	Commercial							Municipal			Residential				Home Equity		Consumer		Unallocated			Total
	Real Estate		Construction			Other					Term		Construction		Line of Credit
For the nine months ended September 30, 2012
Beginning balance	$	5,659,000	$	658,000		$	2,063,000	$	19,000		$	1,159,000	$	255,000	$	595,000	$	584,000	$	2,008,000		$	13,000,000
Charge offs		1,101,000		87,000			2,168,000		-			554,000		381,000		391,000		382,000		-			5,064,000
Recoveries		4,000		247,000			50,000		-			3,000		42,000		-		157,000		-			503,000
Provision		1,133,000		241,000			2,687,000		(1,000	)		1,615,000		98,000		586,000		189,000		(248,000	)		6,300,000
Ending balance	$	5,695,000	$	1,059,000		$	2,632,000	$	18,000		$	2,223,000	$	14,000	$	790,000	$	548,000	$	1,760,000		$	14,739,000
For the three months ended September 30, 2012
Beginning balance	$	5,564,000	$	1,373,000		$	2,476,000	$	19,000		$	1,587,000	$	58,000	$	809,000	$	603,000	$	1,895,000		$	14,384,000
Charge offs		186,000		87,000			6,000		-			179,000		263,000		342,000		106,000		-			1,169,000
Recoveries		3,000		1,000			39,000		-			1,000		42,000		-		38,000		-			124,000
Provision		314,000		(228,000	)		123,000		(1,000	)		814,000		177,000		323,000		13,000		(135,000	)		1,400,000
Ending balance	$	5,695,000	$	1,059,000		$	2,632,000	$	18,000		$	2,223,000	$	14,000	$	790,000	$	548,000	$	1,760,000		$	14,739,000
Allowance for loan losses as of September 30, 2012
Ending balance specifically evaluated for impairment	$	1,416,000	$	696,000		$	1,240,000	$	-		$	1,494,000	$	-	$	215,000	$	1,000	$	-		$	5,062,000
Ending balance collectively evaluated for impairment	$	4,279,000	$	363,000		$	1,392,000	$	18,000		$	729,000	$	14,000	$	575,000	$	547,000	$	1,760,000		$	9,677,000
Related loan balances as of September 30, 2012
Ending balance	$	256,531,000	$	21,905,000		$	83,703,000	$	16,448,000		$	369,949,000	$	6,528,000	$	100,099,000	$	14,708,000	$	-		$	869,871,000
Ending balance specifically evaluated for impairment	$	16,321,000	$	6,645,000		$	4,905,000	$	-		$	19,305,000	$	23,000	$	1,445,000	$	1,000	$	-		$	48,645,000
Ending balance collectively evaluated for impairment	$	240,210,000	$	15,260,000		$	78,798,000	$	16,448,000		$	350,644,000	$	6,505,000	$	98,654,000	$	14,707,000	$	-		$	821,226,000

The following table presents allowance for loan loss balances by class and related loan balances by class as of December 31, 2011:

	Commercial						Municipal		Residential				Home Equity		Consumer		Unallocated		Total
	Real Estate		Construction		Other				Term		Construction		Line of Credit
Allowance for loan losses as of December 31, 2011
Ending balance specifically evaluated for impairment	$	808,000	$	33,000	$	402,000	$	-	$	478,000	$	235,000	$	91,000	$	11,000	$	-	$	2,058,000
Ending balance collectively evaluated for impairment	$	4,851,000	$	625,000	$	1,661,000	$	19,000	$	681,000	$	20,000	$	504,000	$	573,000	$	2,008,000	$	10,942,000
Related loan balances as of December 31, 2011
Ending balance	$	255,424,000	$	32,574,000	$	86,982,000	$	16,221,000	$	341,286,000	$	10,469,000	$	105,244,000	$	16,788,000	$	-	$	864,988,000
Ending balance specifically evaluated for impairment	$	10,141,000	$	5,702,000	$	7,042,000	$	-	$	16,821,000	$	1,198,000	$	1,163,000	$	53,000	$	-	$	42,120,000
Ending balance collectively evaluated for impairment	$	245,283,000	$	26,872,000	$	79,940,000	$	16,221,000	$	324,465,000	$	9,271,000	$	104,081,000	$	16,735,000	$	-	$	822,868,000

The following table presents allowance for loan losses activity by class for the nine-months and quarter ended September 30, 2011, and allowance for loan loss balances by class and related loan balances by class as of September 30, 2011:

	Commercial							Municipal		Residential				Home Equity		Consumer		Unallocated			Total
	Real Estate		Construction			Other				Term		Construction		Line of Credit
For the nine months ended September 30, 2011
Beginning balance	$	5,260,000	$	1,012,000		$	2,377,000	$	19,000	$	1,408,000	$	44,000	$	670,000	$	646,000	$	1,880,000		$	13,316,000
Charge offs		835,000		-			942,000		-		1,013,000		505,000		240,000		298,000		-			3,833,000
Recoveries		8,000		-			33,000		-		5,000		-		1,000		189,000		-			236,000
Provision		3,023,000		(208,000	)		1,433,000		-		1,044,000		581,000		143,000		78,000		(494,000	)		5,600,000
Ending balance	$	7,456,000	$	804,000		$	2,901,000	$	19,000	$	1,444,000	$	120,000	$	574,000	$	615,000	$	1,386,000		$	15,319,000
For the three months ended September 30, 2011
Beginning balance	$	6,927,000	$	702,000		$	3,323,000	$	19,000	$	1,356,000	$	35,000	$	652,000	$	664,000	$	1,356,000		$	15,034,000
Charge offs		-		-			623,000		-		316,000		-		195,000		142,000		-			1,276,000
Recoveries		3,000		-			12,000		-		1,000		-		-		43,000		-			59,000
Provision		526,000		102,000			189,000		-		403,000		85,000		117,000		50,000		30,000			1,502,000
Ending balance	$	7,456,000	$	804,000		$	2,901,000	$	19,000	$	1,444,000	$	120,000	$	574,000	$	615,000	$	1,386,000		$	15,319,000
Allowance for loan losses as of September 30, 2011
Ending balance specifically evaluated for impairment	$	636,000	$	-		$	352,000	$	-	$	398,000	$	82,000	$	95,000	$	64,000	$	-		$	1,627,000
Ending balance collectively evaluated for impairment	$	6,820,000	$	804,000		$	2,549,000	$	19,000	$	1,046,000	$	38,000	$	479,000	$	551,000	$	1,386,000		$	13,692,000
Related loan balances as of September 30, 2011
Ending balance	$	257,910,000	$	30,345,000		$	96,045,000	$	19,853,000	$	329,730,000	$	12,061,000	$	105,891,000	$	16,738,000	$	-		$	868,573,000
Ending balance specifically evaluated for impairment	$	7,739,000	$	792,000		$	1,940,000	$	-	$	16,067,000	$	396,000	$	1,234,000	$	102,000	$	-		$	28,270,000
Ending balance collectively evaluated for impairment	$	250,171,000	$	29,553,000		$	94,105,000	$	19,853,000	$	313,663,000	$	11,665,000	$	104,657,000	$	16,636,000	$	-		$	840,303,000

Troubled debt restructurings by class and specific reserve

As of September 30, 2012, the Company had 91 loans with a value of $29,349,000 that have been classified as TDRs. This compares to 59 loans with a value of $22,858,000 and 45 loans with a value of $10,467,000 classified as TDRs as of December 31, 2011 and September 30, 2011, respectively. The impairment carried as a specific reserve in the allowance for loan losses is calculated by present valuing the cashflow modification on the loan, or, for collateral-dependent loans, using the fair value of the collateral less costs to sell. The following table shows TDRs by class and the specific reserve as of September 30, 2012:

	Number of Loans		Balance		Specific Reserves
Commercial
Real estate		18	$	12,329,000	$	823,000
Construction		2		3,099,000		696,000
Other		20		2,614,000		594,000
Municipal		-		-		-
Residential
Term		50		10,890,000		371,000
Construction		-		-		-
Home equity line of credit		1		417,000		-
Consumer		-		-		-
		91	$	29,349,000	$	2,484,000

As of September 30, 2012, 15 of the loans classified as TDRs with a total balance of $2,820,000 were more than 30 days past due. Of these loans, six loans with an outstanding balance of $970,000 had been placed on TDR status in the previous 12 months. The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of September 30, 2012:

	Number of Loans		Balance		Specific Reserves
Commercial
Real estate		1	$	263,000	$	-
Construction		-		-		-
Other		2		55,000		22,000
Municipal		-		-		-
Residential
Term		12		2,502,000		148,000
Construction		-		-		-
Home equity line of credit		-		-		-
Consumer		-		-		-
		15	$	2,820,000	$	170,000

Loans placed on troubled debt restructurings by class and specific reserve

The following table shows loans placed on TDR status in the nine months ended September 30, 2012, by class of loan and the associated specific reserve included in the allowance for loan losses as of September 30, 2012:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate		13	$	6,962,000	$	7,171,000	$	175,000
Construction		1		1,951,000		1,951,000		696,000
Other		14		1,369,000		1,380,000		546,000
Municipal		-		-		-		-
Residential
Term		9		1,670,000		1,672,000		84,000
Construction		-		-		-		-
Home equity line of credit		1		417,000		417,000		-
Consumer		-		-		-		-
		38	$	12,369,000	$	12,591,000	$	1,501,000

For the quarter ended September 30, 2012, 11 loans were placed on TDR status with an outstanding balance of $4,512,000. These were considered to be TDRs because concessions had been granted to borrowers experiencing financial difficulties. Concessions include reductions in interest rates, principal and/or interest forbearance, payment extensions, or combinations thereof. The following table shows loans placed on TDR status in the quarter ended September 30, 2012, by class of loan and the associated specific reserve included in the allowance for loan losses as of September 30, 2012:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserves
Commercial
Real estate		2	$	3,150,000	$	3,150,000	$	29,000
Construction		-		-		-		-
Other		6		682,000		682,000		2,000
Municipal		-		-		-		-
Residential
Term		2		263,000		264,000		15,000
Construction		-		-		-		-
Home equity line of credit		1		417,000		417,000		-
Consumer		-		-		-		-
		11	$	4,512,000	$	4,513,000	$	46,000