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EX-32.0 - EXHIBIT 32.0 - United Financial Bancorp, Inc.ubnk20170331ex320.htm
EX-31.2 - EXHIBIT 31.2 - United Financial Bancorp, Inc.ubnk20170331ex312.htm
EX-31.1 - EXHIBIT 31.1 - United Financial Bancorp, Inc.ubnk20170331ex311.htm
EX-10.22 - EXHIBIT 10.22 - United Financial Bancorp, Inc.ubnk20170331ex1022.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
ý
 
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2017.
Commission File Number: 001-35028
ufbancorplogorgb3a15.jpg
United Financial Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Connecticut
 
27-3577029
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
45 Glastonbury Boulevard, Glastonbury, Connecticut
 
06033
(Address of principal executive offices)
 
(Zip Code)
(860) 291-3600
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ý  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter prior that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12B-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
Accelerated filer
ý
 
 
 
 
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
Smaller reporting company
¨
 
 
 
 
 
 
Emerging growth company
¨


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12B-2 of the Act).    Yes  ¨    No  ý
As of April 28, 2017, there were 50,758,202 shares of Registrant’s no par value common stock outstanding.

 


Table of Contents
 
 
 
Page
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 
Exhibits
 




Part 1 - FINANCIAL INFORMATION
Item 1 - Interim Financial Statements
United Financial Bancorp, Inc. and Subsidiaries
Consolidated Statements of Condition
(Unaudited)
 
March 31,
2017
 
December 31,
2016
 
(In thousands, except share data)
ASSETS
 
 
 
Cash and due from banks
$
45,279

 
$
47,248

Short-term investments
39,381

 
43,696

Total cash and cash equivalents
84,660

 
90,944

Available-for-sale securities - at fair value
1,075,729

 
1,043,411

Held-to-maturity securities - at amortized cost
13,937

 
14,038

Loans held for sale
87,031

 
62,517

Loans receivable (net of allowance for loan losses of $43,304
at March 31, 2017 and $42,798 at December 31, 2016)
4,913,953

 
4,870,552

Federal Home Loan Bank of Boston stock
52,707

 
53,476

Accrued interest receivable
19,126

 
18,771

Deferred tax asset, net
37,040

 
39,962

Premises and equipment, net
51,299

 
51,757

Goodwill
115,281

 
115,281

Core deposit intangible
5,517

 
5,902

Cash surrender value of bank-owned life insurance
169,007

 
167,823

Other assets
71,333

 
65,086

Total assets
$
6,696,620

 
$
6,599,520

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Liabilities:
 
 
 
Deposits:
 
 
 
Non-interest-bearing
$
690,516

 
$
708,050

Interest-bearing
4,099,843

 
4,003,122

Total deposits
4,790,359

 
4,711,172

Mortgagors’ and investors’ escrow accounts
10,925

 
13,354

Advances from the Federal Home Loan Bank
1,008,942

 
1,046,712

Other borrowings
171,111

 
122,907

Accrued expenses and other liabilities
49,300

 
49,509

Total liabilities
6,030,637

 
5,943,654

 

 

Stockholders’ equity:
 
 
 
Preferred stock (no par value; 2,000,000 authorized; no shares issued)

 

Common stock (no par value; authorized 120,000,000 shares; 50,738,221 and 50,786,671 shares issued and outstanding, at March 31, 2017 and December 31, 2016, respectively)
531,275

 
531,848

Additional paid-in capital
7,498

 
7,227

Unearned compensation - ESOP
(5,637
)
 
(5,694
)
Retained earnings
145,466

 
137,838

Accumulated other comprehensive loss, net of tax
(12,619
)
 
(15,353
)
Total stockholders’ equity
665,983

 
655,866

Total liabilities and stockholders’ equity
$
6,696,620

 
$
6,599,520


See accompanying notes to unaudited consolidated financial statements.
3
 


United Financial Bancorp, Inc. and Subsidiaries
Consolidated Statements of Net Income
(Unaudited)
 
For the Three Months 
 Ended March 31,
 
2017
 
2016
 
(In thousands, except share and per share data)
Interest and dividend income:
 
 
 
Loans
$
46,493

 
$
45,472

Securities - taxable interest
5,510

 
5,096

Securities - non-taxable interest
2,254

 
2,010

Securities - dividends
808

 
923

Interest-bearing deposits
101

 
73

Total interest and dividend income
55,166

 
53,574

Interest expense:
 
 
 
Deposits
6,819

 
6,266

Borrowed funds
4,050

 
3,906

Total interest expense
10,869

 
10,172

Net interest income
44,297

 
43,402

Provision for loan losses
2,288

 
2,688

Net interest income after provision for loan losses
42,009

 
40,714

Non-interest income:
 
 
 
Service charges and fees
5,418

 
4,594

Gain on sales of securities, net
457

 
1,452

Income from mortgage banking activities
1,321

 
860

Bank-owned life insurance income
1,207

 
818

Net loss on limited partnership investments
(80
)
 
(936
)
Other income (loss)
182

 
(61
)
Total non-interest income
8,505

 
6,727

Non-interest expense:
 
 
 
Salaries and employee benefits
19,730

 
17,791

Service bureau fees
2,103

 
2,029

Occupancy and equipment
4,469

 
3,900

Professional fees
1,309

 
881

Marketing and promotions
712

 
592

FDIC insurance assessments
679

 
939

Core deposit intangible amortization
385

 
433

FHLBB prepayment penalties

 
1,454

Other
5,308

 
5,744

Total non-interest expense
34,695

 
33,763

Income before income taxes
15,819

 
13,678

Provision for income taxes
2,093

 
1,784

Net income
$
13,726

 
$
11,894

 
 
 
 
Net income per share:
 
 
 
Basic
$
0.27

 
$
0.24

Diluted
$
0.27

 
$
0.24

Weighted-average shares outstanding:
 
 
 
Basic
50,257,825

 
49,423,218

Diluted
51,029,795

 
49,652,632


See accompanying notes to unaudited consolidated financial statements.
4
 


United Financial Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
 
For the Three Months 
 Ended March 31,
 
2017
 
2016
 
(In thousands)
Net income
$
13,726

 
$
11,894

Other comprehensive income:
 
 
 
Securities available for sale:
 
 
 
Unrealized holding gains
3,980

 
10,569

Reclassification adjustment for gains realized in operations (1)
(457
)
 
(1,452
)
Net unrealized gains
3,523

 
9,117

Tax effect - expense
(1,265
)
 
(3,284
)
Net-of-tax amount - securities available for sale
2,258

 
5,833

Interest rate swaps designated as cash flow hedges:
 
 
 
Unrealized gains (losses)
158

 
(9,535
)
Reclassification adjustment for expense realized in operations (2)
440

 
619

Net unrealized gains (losses)
598

 
(8,916
)
Tax effect - (expense) benefit
(215
)
 
3,212

Net-of-tax amount - interest rate swaps
383

 
(5,704
)
Pension and Post-retirement plans:
 
 
 
Reclassification adjustment for prior service costs recognized in net periodic benefit cost (3)
2

 

Reclassification adjustment for losses recognized in net periodic benefit cost (4)
143

 
125

Net change in losses and prior service costs
145

 
125

Tax effect - benefit
(52
)
 
(45
)
Net-of-tax amount - pension and post-retirement plans
93

 
80

Total other comprehensive income
2,734

 
209

Comprehensive income
$
16,460

 
$
12,103

 
(1)
Amounts are included in gain on sales of securities, net in the unaudited Consolidated Statements of Net Income. Income tax expense associated with the reclassification adjustment was $165 and $523 for the three months ended March 31, 2017 and 2016, respectively.
(2)
Amounts are included in borrowed funds expense in the unaudited Consolidated Statements of Net Income. Income tax benefit associated with the reclassification adjustment for the three months ended March 31, 2017 and 2016 was $159 and $223, respectively.
(3)
Amounts are included in salaries and employee benefits expense in the unaudited Consolidated Statements of Net Income. Income tax benefit associated with the reclassification adjustment for prior service costs for the three months ended March 31, 2017 and 2016 was $1 and $0 , respectively.
(4)
Amounts are included in salaries and employee benefits expense in the unaudited Consolidated Statements of Net Income. Income tax benefit associated with the reclassification adjustment for losses recognized in net periodic benefit cost for the three months ended March 31, 2017 and 2016 was $51 and $45, respectively.

See accompanying notes to unaudited consolidated financial statements.
5
 


United Financial Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
 
Common Stock
 
Additional
Paid-in
Capital
 
Unearned
Compensation
 - ESOP
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Stockholders’
Equity
Shares
 
Amount
 
 
 
 
 
 
(In thousands, except share data)
Balance at December 31, 2016
50,786,671

 
$
531,848

 
$
7,227

 
$
(5,694
)
 
$
137,838

 
$
(15,353
)
 
$
655,866

Comprehensive income

 

 

 

 
13,726

 
2,734

 
16,460

Common stock repurchased
(80,000
)
 
(1,312
)
 

 

 

 

 
(1,312
)
Stock-based compensation expense

 

 
697

 

 

 

 
697

ESOP shares released or committed to be released

 

 
44

 
57

 

 

 
101

Shares issued for stock options exercised
38,068

 
694

 
(318
)
 

 

 

 
376

Shares issued for restricted stock grants
2,517

 
45

 
(45
)
 

 

 

 

Cancellation of shares for tax withholding
(9,035
)
 

 
(107
)
 

 

 

 
(107
)
Dividends paid ($0.12 per common share)

 

 

 

 
(6,098
)
 

 
(6,098
)
Balance at March 31, 2017
50,738,221

 
$
531,275

 
$
7,498

 
$
(5,637
)
 
$
145,466

 
$
(12,619
)
 
$
665,983

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
49,941,428

 
$
519,587

 
$
10,722

 
$
(5,922
)
 
$
112,013

 
$
(10,879
)
 
$
625,521

Comprehensive income

 

 

 

 
11,894

 
209

 
12,103

Stock-based compensation expense

 

 
500

 

 

 

 
500

ESOP shares released or committed to be released

 

 
9

 
57

 

 

 
66

Shares issued for stock options exercised and SARs
138,171

 
1,685

 
(609
)
 

 

 

 
1,076

Shares issued for restricted stock grants
30,973

 
350

 
(350
)
 

 

 

 

Cancellation of shares for tax withholding
(2,523
)
 

 
(29
)
 

 

 

 
(29
)
Tax benefit from stock-based awards

 

 
37

 

 

 

 
37

Dividends paid ($0.12 per common share)

 

 

 

 
(5,996
)
 

 
(5,996
)
Balance at March 31, 2016
50,108,049

 
$
521,622

 
$
10,280

 
$
(5,865
)
 
$
117,911

 
$
(10,670
)
 
$
633,278


See accompanying notes to unaudited consolidated financial statements.
6
 


United Financial Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
For the Three Months 
 Ended March 31,
 
2017
 
2016
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net income
$
13,726

 
$
11,894

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Amortization of premiums and discounts on investments, net
994

 
1,284

Amortization (accretion) of intangible assets and purchase accounting marks, net
409

 
(1,462
)
Amortization of subordinated debt issuance costs
32

 
32

Stock-based compensation expense
697

 
500

ESOP expense
101

 
66

Loss on extinguishment of debt

 
1,454

Tax benefit from stock-based awards

 
37

Provision for loan losses
2,288

 
2,688

Gain on sales of securities, net
(457
)
 
(1,452
)
Loans originated for sale
(76,340
)
 
(87,182
)
Principal balance of loans sold
51,826

 
89,758

(Increase) decrease in mortgage servicing asset
(180
)
 
803

Gain on sales of other real estate owned
(27
)
 
(8
)
Net gain in mortgage banking fair value adjustments
(626
)
 
(441
)
Loss (gain) on disposal of equipment
20

 
(17
)
Write-downs of other real estate owned
32

 

Depreciation and amortization
1,391

 
1,351

Net loss on limited partnership investments
80

 
936

Deferred income tax expense
1,390

 
755

Increase in cash surrender value of bank-owned life insurance
(1,199
)
 
(818
)
Income recognized from death benefit on BOLI
(8
)
 

Net change in:
 
 
 
Deferred loan fees and premiums
(1,637
)
 
(594
)
Accrued interest receivable
(355
)
 
(1,182
)
Other assets
(6,425
)
 
(41,510
)
Accrued expenses and other liabilities
(58
)
 
15,893

Net cash used in operating activities
(14,326
)
 
(7,215
)
Cash flows from investing activities:
 
 
 
Proceeds from sales of available-for-sale securities
130,630

 
108,152

Proceeds from calls and maturities of available-for-sale securities
31,489

 

Principal payments on available-for-sale securities
16,927

 
15,302

Principal payments on held-to-maturity securities
92

 
124

Purchases of available-for-sale securities
(209,197
)
 
(145,435
)
Redemption of FHLBB and other stock
2,512

 

Purchase of FHLBB stock
(126
)
 
(4,793
)
Proceeds from sale of other real estate owned
340

 
509

Purchases of loans
(16,955
)
 
(25,454
)
Loan originations, net of principal repayments
(27,290
)
 
(10,437
)
Purchases of premises and equipment
(1,190
)
 
(263
)
Proceeds from sale of equipment
224

 
1

Net cash used in investing activities
(72,544
)
 
(62,294
)

(Continued)
See accompanying notes to unaudited consolidated financial statements.
7
 


United Financial Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows - Concluded
(Unaudited)
 
For the Three Months 
 Ended March 31,
 
2017
 
2016
 
(In thousands)
Cash flows from financing activities:
 
 
 
Net (decrease) increase in non-interest-bearing deposits
(17,534
)
 
21,136

Net increase in interest-bearing deposits
96,916

 
76,197

Net decrease in mortgagors’ and investors’ escrow accounts
(2,429
)
 
(3,830
)
Net decrease in short-term FHLBB advances
(62,000
)
 
(45,000
)
Repayments of long-term FHLBB advances
(378
)
 
(1,024
)
Prepayments of long-term FHLBB borrowings and penalty

 
(37,796
)
Proceeds from long-term FHLBB advances
25,000

 
60,000

Net change in other borrowings
48,152

 
(3,204
)
Proceeds from exercise of stock options and SARs
376

 
1,076

Common stock repurchased
(1,312
)
 

Cancellation of shares for tax withholding
(107
)
 
(29
)
Tax benefit from stock-based awards

 
37

Cash dividend paid on common stock
(6,098
)
 
(5,996
)
Net cash provided by financing activities
80,586

 
61,567

Net decrease in cash and cash equivalents
(6,284
)
 
(7,942
)
Cash and cash equivalents, beginning of period
90,944

 
95,176

Cash and cash equivalents, end of period
$
84,660

 
$
87,234

 
 
 
 
Supplemental Disclosures of Cash Flow Information:
 
 
 
Cash paid during the year for:
 
 
 
Interest
$
10,385

 
$
9,809

Income taxes, net
2,740

 
1,445

Transfer of loans to other real estate owned
241

 
405

Decrease in due to broker, investment purchases
(6
)
 


See accompanying notes to unaudited consolidated financial statements.
8
 


United Financial Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 1.
Summary of Significant Accounting Policies
Nature of Operations
United Financial Bancorp, Inc. (the “Company” or “United”) is headquartered in Glastonbury, Connecticut, and through United Bank (the “Bank”) and various subsidiaries, delivers financial services to individuals, families and businesses primarily throughout Connecticut and Massachusetts through 53 banking offices, its commercial loan production offices, its mortgage loan production offices, 63 ATMs, telephone banking, mobile banking and online banking (www.bankatunited.com).
Basis of Presentation
The consolidated interim financial statements and the accompanying notes presented in this report include the accounts of the Company, the Bank and the Bank’s wholly-owned subsidiaries, United Bank Mortgage Company, United Bank Investment Corp., Inc., United Bank Commercial Properties, Inc., United Bank Residential Properties, Inc., United Northeast Financial Advisors, Inc., United Bank Investment Sub, Inc., UCB Securities, Inc. II, UB Properties, LLC, United Financial Realty HC, Inc. and United Financial Business Trust I.
The consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included in the interim unaudited consolidated financial statements. Interim results are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or any future period. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s 2016 audited consolidated financial statements and notes thereto included in United Financial Bancorp, Inc.’s Annual Report on Form 10-K as of and for the year ended December 31, 2016.
Common Share Repurchases
The Company is chartered in the state of Connecticut. Connecticut law does not provide for treasury shares, rather shares repurchased by the Company constitute authorized, but unissued shares. GAAP states that accounting for treasury stock shall conform to state law. Therefore, the cost of shares repurchased by the Company has been allocated to common stock balances.
Reclassifications
Certain reclassifications have been made in prior periods’ consolidated financial statements to conform to the 2017 presentation. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or net change in cash equivalents.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results in the future could vary from the amounts derived from management’s estimates and assumptions. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the realizability of deferred tax assets, the evaluation of securities for other-than-temporary impairment, the valuation of derivative instruments and hedging activities, and goodwill impairment valuations.
Note 2.
Recent Accounting Pronouncements
Receivables
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-08 Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. Under the new guidance, the premium on bonds purchased at a premium will be amortized to the bond’s call date rather than the date of maturity to more closely align interest income recorded on bonds held at a premium or a discount with the economics of the underlying instrument. This ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. This ASU is expected to have an impact of reducing approximately $6.4 million of premiums to the Company’s Consolidated Financial Statements with an offset being a reduction in retained earnings upon initial adoption.


9
 


Compensation
In March 2017, the FASB issued ASU No. 2017-07 Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Under the new guidance, employers will present the service cost component of the net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers are required to include all other components of net benefit cost in a separate line item(s) that includes the service cost and outside of any subtotal of non-GAAP income, if one is presented. Employers will have to disclose the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement. ASU 2017-07 is effective for public companies for fiscal years beginning after December 15, 2017. Early adoption is permitted in the first financial statements issued for a fiscal year, provided all provisions of the ASU are adopted. This ASU is not expected to have a significant impact on the Company’s Consolidated Financial Statements.
Note 3.
Securities
The amortized cost, gross unrealized gains, gross unrealized losses and fair value of investment securities at March 31, 2017 and December 31, 2016 are as follows:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
March 31, 2017
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
Government-sponsored residential mortgage-backed securities
$
225,266

 
$
309

 
$
(1,841
)
 
$
223,734

Government-sponsored residential collateralized debt obligations
204,406

 
912

 
(1,040
)
 
204,278

Government-sponsored commercial mortgage-backed securities
22,489

 
15

 
(280
)
 
22,224

Government-sponsored commercial collateralized debt obligations
142,786

 
179

 
(2,404
)
 
140,561

Asset-backed securities
154,215

 
2,221

 
(251
)
 
156,185

Corporate debt securities
87,969

 
514

 
(1,915
)
 
86,568

Obligations of states and political subdivisions
238,251

 
282

 
(6,959
)
 
231,574

Total debt securities
1,075,382

 
4,432

 
(14,690
)
 
1,065,124

Marketable equity securities, by sector:
 
 
 
 
 
 
 
Banks
9,428

 
807

 

 
10,235

Industrial
109

 
71

 

 
180

Oil and gas
132

 
58

 

 
190

Total marketable equity securities
9,669

 
936

 

 
10,605

Total available-for-sale securities
$
1,085,051

 
$
5,368

 
$
(14,690
)
 
$
1,075,729

Held to maturity:
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
Obligations of states and political subdivisions
$
12,311

 
$
775

 
$
(34
)
 
$
13,052

Government-sponsored residential mortgage-backed securities
1,626

 
161

 

 
1,787

Total held-to-maturity securities
$
13,937

 
$
936

 
$
(34
)
 
$
14,839




10
 


 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
December 31, 2016
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
Government-sponsored residential mortgage-backed securities
$
181,419

 
$
365

 
$
(2,236
)
 
$
179,548

Government-sponsored residential collateralized debt obligations
184,185

 
438

 
(1,363
)
 
183,260

Government-sponsored commercial mortgage-backed securities
26,949

 
23

 
(442
)
 
26,530

Government-sponsored commercial collateralized debt obligations
164,433

 
296

 
(1,802
)
 
162,927

Asset-backed securities
166,336

 
1,619

 
(988
)
 
166,967

Corporate debt securities
76,787

 
533

 
(2,305
)
 
75,015

Obligations of states and political subdivisions
223,733

 
127

 
(7,484
)
 
216,376

Total debt securities
1,023,842

 
3,401

 
(16,620
)
 
1,010,623

Marketable equity securities, by sector:
 
 
 
 
 
 
 
Banks
32,174

 
482

 
(243
)
 
32,413

Industrial
109

 
58

 

 
167

Oil and gas
131

 
77

 

 
208

Total marketable equity securities
32,414

 
617

 
(243
)
 
32,788

Total available-for-sale securities
$
1,056,256

 
$
4,018

 
$
(16,863
)
 
$
1,043,411

Held to maturity:
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
Obligations of states and political subdivisions
$
12,321

 
$
654

 
$
(35
)
 
$
12,940

Government-sponsored residential mortgage-backed securities
1,717

 
172

 

 
1,889

Total held-to-maturity securities
$
14,038

 
$
826

 
$
(35
)
 
$
14,829


At March 31, 2017, the net unrealized loss on securities available for sale of $9.3 million, net of an income tax expense of $3.3 million, or $6.0 million, was included in accumulated other comprehensive loss in the unaudited Consolidated Statement of Condition.
The amortized cost and fair value of debt securities at March 31, 2017 by contractual maturities are presented below. Actual maturities may differ from contractual maturities because some securities may be called or repaid without any penalties. Also, because mortgage-backed securities require periodic principal paydowns, they are not included in the maturity categories in the following maturity summary.


11
 


 
Available for Sale
 
Held to Maturity
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
(In thousands)
Maturity:
 
 
 
 
 
 
 
Within 1 year
$

 
$

 
$

 
$

After 1 year through 5 years
16,689

 
16,784

 
1,178

 
1,199

After 5 years through 10 years
81,882

 
81,217

 
1,102

 
1,068

After 10 years
227,649

 
220,141

 
10,031

 
10,785

 
326,220

 
318,142

 
12,311

 
13,052

Government-sponsored residential mortgage-backed securities
225,266

 
223,734

 
1,626

 
1,787

Government-sponsored residential collateralized debt obligations
204,406

 
204,278

 

 

Government-sponsored commercial mortgage-backed securities
22,489

 
22,224

 

 

Government-sponsored commercial collateralized debt obligations
142,786

 
140,561

 

 

Asset-backed securities
154,215

 
156,185

 

 

Total debt securities
$
1,075,382

 
$
1,065,124

 
$
13,937

 
$
14,839


At March 31, 2017, the Company had 109 securities with a fair value of $496.8 million pledged as derivative collateral, collateral for reverse repurchase borrowings and collateral for Federal Home Loan Bank of Boston (“FHLBB”) borrowing capacity. At December 31, 2016, the Company had 115 securities with a fair value of $510.0 million pledged as derivative collateral, collateral for reverse repurchase borrowings, and collateral for FHLBB borrowing capacity.
For the three months ended March 31, 2017 and 2016, gross gains of $1.7 million were realized on the sales of available-for-sale securities for both periods. There were gross losses of $1.3 million and $202,000 realized on the sale of available-for-sale securities for the three months ended March 31, 2017 and 2016, respectively.
As of March 31, 2017, the Company did not have any exposure to private-label mortgage-backed securities. The Company also did not own any single security with an aggregate book value in excess of 10% of the Company’s stockholders’ equity.
As of March 31, 2017, the fair value of the obligations of states and political subdivisions portfolio was $244.6 million, with no significant geographic or issuer exposure concentrations. Of the total state and political obligations of $244.6 million, $106.0 million were representative of general obligation bonds for which $72.5 million are general obligations of political subdivisions of the respective state, rather than general obligations of the state itself. 
















12
 


The following table summarizes gross unrealized losses and fair value, aggregated by category and length of time the securities have been in a continuous unrealized loss position, as of March 31, 2017 and December 31, 2016:
 
Less Than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
(In thousands)
March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities:
 
 
 
 
 
 
 
 
 
 
 
Government-sponsored residential mortgage-backed securities
$
155,665

 
$
(1,841
)
 
$

 
$

 
$
155,665

 
$
(1,841
)
Government-sponsored residential collateralized debt obligations
83,542

 
(730
)
 
6,664

 
(310
)
 
90,206

 
(1,040
)
Government-sponsored commercial mortgage-backed securities
18,250

 
(280
)
 

 

 
18,250

 
(280
)
Government-sponsored commercial collateralized debt obligations
119,514

 
(2,404
)
 

 

 
119,514

 
(2,404
)
Asset-backed securities
17,022

 
(123
)
 
2,290

 
(128
)
 
19,312

 
(251
)
Corporate debt securities
44,204

 
(791
)
 
1,605

 
(1,124
)
 
45,809

 
(1,915
)
Obligations of states and political subdivisions
146,298

 
(5,177
)
 
41,160

 
(1,782
)
 
187,458

 
(6,959
)
Total available-for-sale securities
$
584,495

 
$
(11,346
)
 
$
51,719

 
$
(3,344
)
 
$
636,214

 
$
(14,690
)
 
 
 
 
 
 
 
 
 
 
 
 
Held to Maturity:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions
$

 
$

 
$
1,068

 
$
(34
)
 
$
1,068

 
$
(34
)
Total held to maturity securities
$

 
$

 
$
1,068

 
$
(34
)
 
$
1,068

 
$
(34
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities:
 
 
 
 
 
 
 
 
 
 
 
Government-sponsored residential mortgage-backed securities
$
156,000

 
$
(2,236
)
 
$

 
$

 
$
156,000

 
$
(2,236
)
Government-sponsored residential collateralized debt obligations
109,468

 
(1,082
)
 
6,691

 
(281
)
 
116,159

 
(1,363
)
Government-sponsored commercial mortgage-backed securities
23,808

 
(442
)
 

 

 
23,808

 
(442
)
Government-sponsored commercial collateralized debt obligations
128,238

 
(1,802
)
 

 

 
128,238

 
(1,802
)
Asset-backed securities
23,415

 
(163
)
 
20,326

 
(825
)
 
43,741

 
(988
)
Corporate debt securities
43,990

 
(885
)
 
3,335

 
(1,420
)
 
47,325

 
(2,305
)
Obligations of states and political subdivisions
156,891

 
(5,620
)
 
41,136

 
(1,864
)
 
198,027

 
(7,484
)
Total debt securities
641,810

 
(12,230
)
 
71,488

 
(4,390
)
 
713,298

 
(16,620
)
Marketable equity securities
19,002

 
(243
)
 

 

 
19,002

 
(243
)
Total available-for-sale securities
$
660,812

 
$
(12,473
)
 
$
71,488

 
$
(4,390
)
 
$
732,300

 
$
(16,863
)
 
 
 
 
 
 
 
 
 
 
 
 
Held to Maturity:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities:
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions
$

 
$

 
$
1,070

 
$
(35
)
 
$
1,070

 
$
(35
)
Total held to maturity securities
$

 
$

 
$
1,070

 
$
(35
)
 
$
1,070

 
$
(35
)


13
 


Of the available-for-sale securities summarized above as of March 31, 2017, 150 issues had unrealized losses equaling 1.9% of the amortized cost basis for less than twelve months and 23 issues had unrealized losses of 6.1% of the amortized cost basis for twelve months or more. There was one unrealized loss of $34,000 on a debt security held to maturity at March 31, 2017. As of December 31, 2016, 170 issues had unrealized losses equaling 1.9% of the cost basis for less than twelve months and 31 issues had unrealized losses equaling 5.8% of the amortized cost basis for twelve months or more.
Based on its detailed quarterly review of the securities portfolio, management believes that no individual unrealized loss as of March 31, 2017 represents an other-than-temporary impairment. Among other things, the other-than-temporary impairment review of the investment securities portfolio focuses on the combined factors of percentage and length of time by which an issue is below book value as well as consideration of issuer specific information (present value of cash flows expected to be collected, issuer rating changes and trends, credit worthiness and review of underlying collateral), broad market details and the Company’s intent to sell the security or if it is more likely than not that the Company will be required to sell the debt security before recovering its cost. The Company also considers whether the depreciation is due to interest rates, market changes, or credit risk.
The following paragraphs outline the Company’s position related to unrealized losses in its investment securities portfolio at March 31, 2017.
Government-sponsored residential mortgage backed securities, residential collateralized debt obligations, commercial mortgage-backed securities, and commercial collateralized debt obligations.  The unrealized losses on certain securities within the Company’s government-sponsored mortgage-backed and collateralized debt obligation portfolios were caused by the continued pickup of prepayment speeds relative to original purchase expectations. The Company monitors this risk, and therefore, strives to minimize premiums within this security class. The Company does not expect these securities to settle at a price less than the par value of the securities.
Asset-backed securitiesThe unrealized losses on certain securities within the Company’s asset-backed securities sleeve were largely driven by slight increases in the spreads of certain managers over comparable securities’ managers relative to the time of purchase.  Based on the credit profiles and asset qualities of the individual securities, management does not believe that the securities have suffered from any credit related losses at this time. The Company does not expect these securities to settle at a price less than the par value of the securities.
Corporate debt securities. The unrealized losses on corporate debt securities is primarily related to one pooled trust preferred security, Preferred Term Security XXVIII, Ltd (“PRETSL XXVIII”). The unrealized loss on this security is caused by the low interest rate environment, as the security reprices quarterly to the three month LIBOR and the security’s low spread as market spreads on similar newly issued securities have increased. No loss of principal is projected. Based on the existing credit profile, management does not believe that this security has suffered from any credit related losses. The unrealized loss on the remainder of the corporate credit portfolio has been driven primarily by a general widening in credit spreads across the curve.
Obligations of states and political subdivisions. The unrealized loss on obligations of states and political subdivisions relates to several securities, with no geographic concentration. The unrealized loss was largely due to an upward shift in the rates relative to the time of purchase of certain securities.
The Company will continue to review its entire portfolio for other-than-temporarily impaired securities.


14
 


Note 4.
Loans Receivable and Allowance for Loan Losses
A summary of the Company’s loan portfolio is as follows:
 
March 31, 2017
 
December 31, 2016
 
Amount
 
Percent
 
Amount
 
Percent
 
(Dollars in thousands)
Commercial real estate loans:
 
 
 
 
 
 
 
Owner-occupied
$
433,358

 
8.8
%
 
$
416,718

 
8.5
%
Investor non-owner occupied
1,697,414

 
34.3

 
1,705,319

 
34.8

Construction
85,533

 
1.7

 
98,794

 
2.0

Total commercial real estate loans
2,216,305

 
44.8

 
2,220,831

 
45.3

 
 
 
 
 
 
 
 
Commercial business loans
769,153

 
15.6

 
724,557

 
14.8

 
 
 
 
 
 
 
 
Consumer loans:
 
 
 
 
 
 
 
Residential real estate
1,167,428

 
23.6

 
1,156,227

 
23.6

Home equity
516,325

 
10.4

 
536,772

 
11.0

Residential construction
49,456

 
1.0

 
53,934

 
1.1

Other consumer
225,317

 
4.6

 
209,393

 
4.2

Total consumer loans
1,958,526

 
39.6

 
1,956,326

 
39.9

 
 
 
 
 
 
 
 
Total loans
4,943,984

 
100.0
%
 
4,901,714

 
100.0
%
Net deferred loan costs and premiums
13,273

 
 
 
11,636

 
 
Allowance for loan losses
(43,304
)
 
 
 
(42,798
)
 
 
Loans - net
$
4,913,953

 
 
 
$
4,870,552

 
 
Allowance for Loan Losses
Management has established a methodology to determine the adequacy of the allowance for loan losses (“ALL”) that assesses the risks and losses inherent in the loan portfolio. The ALL is established as embedded losses are estimated to have occurred through the provisions for losses charged against operations and is maintained at a level that management considers adequate to absorb losses in the loan portfolio. Management’s judgment in determining the adequacy of the allowance is inherently subjective and is based on past loan loss experience, known and inherent losses and size of the loan portfolios, an assessment of current economic and real estate market conditions, estimates of the current value of underlying collateral, review of regulatory authority examination reports and other relevant factors. An allowance is maintained for impaired loans to reflect the difference, if any, between the carrying value of the loan and the present value of the projected cash flows, observable fair value or collateral value. Loans are charged-off against the ALL when management believes that the uncollectibility of principal is confirmed. Any subsequent recoveries are credited to the ALL when received. In connection with the determination of the ALL, management obtains independent appraisals for significant properties, when considered necessary.
The ALL is maintained at a level estimated by management to provide for probable losses inherent within the loan portfolio. Probable losses are estimated based upon a quarterly review of the loan portfolio, which includes historic default and loss experience, specific problem loans, risk rating profile, economic conditions and other pertinent factors which, in management’s judgment, warrant current recognition in the loss estimation process.
The adequacy of the ALL is subject to considerable assumptions and judgment used in its determination. Therefore, actual losses could differ materially from management’s estimate if actual conditions differ significantly from the assumptions utilized. These conditions include economic factors in the Company’s market and nationally, industry trends and concentrations, real estate values and trends, and the financial condition and performance of individual borrowers.
The Company’s general practice is to identify problem credits early and recognize full or partial charge-offs as promptly as practicable when it is determined that the collection of loan principal is unlikely. The Company recognizes full or partial charge-offs on collateral dependent impaired loans when the collateral is deemed to be insufficient to support the carrying value of the loan. The Company does not recognize a recovery when an updated appraisal indicates a subsequent increase in value.


15
 


At March 31, 2017, the Company had a loan loss allowance of $43.3 million, or 0.88%, of total loans as compared to a loan loss allowance of $42.8 million, or 0.87%, of total loans at December 31, 2016. Management believes that the allowance for loan losses is adequate and consistent with asset quality indicators and that it represents the best estimate of probable losses inherent in the loan portfolio.
There are three components for the allowance for loan loss calculation:
General component

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: owner-occupied and investor non-owner occupied commercial real estate, commercial and residential construction, commercial, residential real estate, home equity, and other consumer. Management uses a rolling average of historical losses based on a three-year loss history to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels and trends in delinquencies; level and trend of charge-offs and recoveries; trends in volume and types of loans; effects of changes in risk selection and underwriting standards, changes in risk selection and underwriting standards; experience and depth of lending weighted average risk rating; and national and local economic trends and conditions. The general component of the allowance for loan losses also includes a reserve based upon historical loss experience for loans which were acquired and have subsequently evidenced measured credit deterioration following initial acquisition. Our acquired loan portfolio is comprised of purchased loans that show no evidence of deterioration subsequent to acquisition and therefore not part of the covered portfolio. Acquired impaired loans are loans with evidence of deterioration subsequent to acquisition and are considered in the covered portfolio in establishing the allowance for loan losses. There were no changes in the Company’s methodology pertaining to the general component of the allowance for loan losses during 2017.
The qualitative factors are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:
Residential real estate and home equity loans – The Bank establishes maximum loan-to-value and debt-to-income ratios and minimum credit scores as an integral component of the underwriting criteria. Loans in these segments are collateralized by owner-occupied residential real estate and repayment is dependent on the income and credit quality of the individual borrower. Within the qualitative allowance factors, national and local economic trends including unemployment rates and potential declines in property value, are key elements reviewed as a component of establishing the appropriate allocation. Overall economic conditions, unemployment rates and housing price trends will influence the underlying credit quality of these segments.
Owner-occupied and investor non-owner occupied commercial real estate (“Owner-occupied CRE” and “Investor CRE”) – Loans in these segments are primarily income-producing properties throughout Connecticut, western Massachusetts, and other select markets in the Northeast. The underlying cash flows generated by the properties could be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management obtains rent rolls annually, continually monitors the cash flows of these loans and performs stress testing.
Commercial and residential construction loans – Loans in this segment primarily include commercial real estate development and residential subdivision loans for which payment is derived from the sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.
Commercial business loans – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy and its effect on business profitability and cash flow could have an effect on the credit quality in this segment.
Other Consumer – Loans in this segment are secured or unsecured and repayment is dependent on the credit quality of the individual borrower. A significant portion of these loans are secured by boats.

For acquired loans accounted for under ASC 310-30, our accretable discount is estimated based upon our expected cash flows for these loans. To the extent that we experience a deterioration in borrower credit quality resulting in a decrease in our expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be established through a provision based on our estimate of future credit losses over the remaining life of the loans.
Allocated component

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan by loan basis for commercial, commercial real estate and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. Updated


16
 


property evaluations are obtained at the time of impairment and serve as the basis for the loss allocation if foreclosure is probable or the loan is collateral dependent.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Loans which are placed on non-accrual status, or deemed troubled debt restructures, are considered impaired by the Company and subject to impairment testing for possible partial or full charge-off when loss can be reasonably determined. Generally, when all contractual payments on a loan are not expected to be collected, or the loan has failed to make contractual payments for a period of 90 days or more, a loan is placed on non-accrual status. In accordance with the Company's loan policy, losses on open and closed end consumer loans are recognized within a period of 120 days past due. For commercial loans, there is no threshold in terms of days past due for losses to be recognized as a result of the complexity in reasonably determining losses within a set time frame. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.

When a loan is determined to be impaired, the Company makes a determination if the repayment of the obligation is collateral dependent. As a majority of impaired loans are collateralized by real estate, appraisals on the underlying value of the property securing the obligation are utilized in determining the specific impairment amount that is allocated to the loan as a component of the allowance calculation. If the loan is collateral dependent, an updated appraisal is obtained within a short period of time from the date the loan is determined to be impaired; typically no longer than 30 days for a residential property and 90 days for a commercial real estate property. The appraisal and the appraised value are reviewed for adequacy and then further discounted for estimated disposition costs and the period of time until resolution, in order to determine the impairment amount. The Company updates the appraised value at least annually and on a more frequent basis if current market factors indicate a potential change in valuation.

The majority of the Company’s loans are collateralized by real estate located in central and eastern Connecticut and western Massachusetts in addition to a portion of the commercial real estate loan portfolio located in the Northeast region of the United States. Accordingly, the collateral value of a substantial portion of the Company’s loan portfolio and real estate acquired through foreclosure is susceptible to changes in market conditions in these areas.
Unallocated component
An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.
Credit Quality Information
The Company utilizes a nine-grade internal loan rating system for residential and commercial real estate, construction, commercial and other consumer loans as follows:
Loans rated 1 – 5: Loans in these categories are considered “pass” rated loans with low to average risk.
Loans rated 6: Loans in this category are considered “special mention.” These loans reflect signs of potential weakness and are being closely monitored by management.
Loans rated 7: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor and there is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.
Loans rated 8: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.
Loans rated 9: Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.
At the time of loan origination, a risk rating based on this nine point grading system is assigned to each loan based on the loan officer’s assessment of risk. For residential real estate and other consumer loans, the Company considers factors such as updated FICO scores, employment status, home prices, loan to value and geography. Residential real estate and other consumer loans are pass rated unless their payment history reveals signs of deterioration, which may result in modifications to the original contractual terms. In situations which require modification to the loan terms, the internal loan grade will typically be reduced to substandard. More complex loans, such as commercial business loans and commercial real estate loans require that our internal credit area further evaluate the risk rating of the individual loan, with the credit area and Chief Credit Officer having final determination of


17
 


the appropriate risk rating. These more complex loans and relationships receive an in-depth analysis and periodic review to assess the appropriate risk rating on a post-closing basis with changes made to the risk rating as the borrower’s and economic conditions warrant. The credit quality of the Company’s loan portfolio is reviewed by a third-party risk assessment firm throughout the year and by the Company’s internal credit management function. The internal and external analysis of the loan portfolio is utilized to identify and quantify loans with higher than normal risk. Loans having a higher risk profile are assigned a risk rating corresponding to the level of weakness identified in the loan. All loans risk rated Special Mention, Substandard or Doubtful are reviewed by management not less than on a quarterly basis to assess the level of risk and to ensure that appropriate actions are being taken to minimize potential loss exposure. Loans identified as being loss are normally fully charged off.
The following table presents the Company’s loans by risk rating at March 31, 2017 and December 31, 2016:
 
Owner-Occupied CRE
 
Investor CRE
 
Construction
 
Commercial Business
 
Residential Real Estate
 
Home Equity
 
Other Consumer
 
(In thousands)
March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans rated 1-5
$
405,924

 
$
1,641,631

 
$
133,454

 
$
743,978

 
$
1,149,885

 
$
510,547

 
$
223,991

Loans rated 6
4,930

 
22,728

 

 
5,260

 
1,062

 

 

Loans rated 7
22,504

 
33,055

 
1,535

 
19,915

 
16,481

 
5,778

 
1,326

Loans rated 8

 

 

 

 

 

 

Loans rated 9

 

 

 

 

 

 

 
$
433,358

 
$
1,697,414

 
$
134,989

 
$
769,153

 
$
1,167,428

 
$
516,325

 
$
225,317

 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans rated 1-5
$
388,389

 
$
1,656,256

 
$
150,411

 
$
698,458

 
$
1,139,662

 
$
531,359

 
$
207,193

Loans rated 6
7,139

 
18,040

 
204

 
7,466

 
1,267

 

 

Loans rated 7
21,190

 
31,023

 
2,113

 
18,633

 
15,298

 
5,413

 
2,200

Loans rated 8

 

 

 

 

 

 

Loans rated 9

 

 

 

 

 

 

 
$
416,718

 
$
1,705,319

 
$
152,728

 
$
724,557

 
$
1,156,227

 
$
536,772

 
$
209,393



18
 


Activity in the allowance for loan losses for the periods ended March 31, 2017 and 2016 were as follows:
 
Owner-Occupied CRE
 
Investor CRE
 
Construction
 
Commercial
Business
 
Residential Real Estate
 
Home Equity
 
Other Consumer
 
Unallocated
 
Total
 
(In thousands)
Three Months Ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
3,765

 
$
14,869

 
$
1,913

 
$
8,730

 
$
7,854

 
$
2,858

 
$
1,353

 
$
1,456

 
$
42,798

Provision (credit) for loan losses
53

 
79

 
76

 
1,041

 
(34
)
 
256

 
837

 
(20
)
 
2,288

Loans charged off

 
(242
)
 
(132
)
 
(703
)
 
(191
)
 
(219
)
 
(487
)
 

 
(1,974
)
Recoveries of loans previously charged off

 
9

 

 
83

 

 
15

 
85

 

 
192

Balance, end of period
$
3,818

 
$
14,715

 
$
1,857

 
$
9,151

 
$
7,629

 
$
2,910

 
$
1,788

 
$
1,436

 
$
43,304

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
2,174

 
$
12,859

 
$
1,895

 
$
5,827

 
$
7,801

 
$
2,391

 
$
146

 
$
794

 
$
33,887

Provision (credit) for loan losses
749

 
936

 
(57
)
 
640

 
99

 
177

 
113

 
31

 
2,688

Loans charged off
(82
)
 
(542
)
 

 
(221
)
 
(180
)
 
(191
)
 
(122
)
 

 
(1,338
)
Recoveries of loans previously charged off

 
4

 

 
128

 
53

 
36

 
42

 

 
263

Balance, end of period
$
2,841

 
$
13,257

 
$
1,838

 
$
6,374

 
$