LOANS AND THE ALLOWANCE FOR LOAN LOSSES

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 6—LOANS AND THE ALLOWANCE FOR LOAN LOSSES

The following table sets forth the composition of the Company’s loan portfolio segments, including net deferred fees and costs, at December 31, 2014 and 2013, respectively:

	2014				2013
	(in thousands)
Commercial		$	499,816			$	229,688
Commercial real estate			1,634,510				536,539
Commercial construction			167,359				42,722
Residential real estate			234,967				150,571
Consumer			2,879				1,084
Gross loans			2,539,531				960,604
Net deferred loan (fees) costs			(890	)			339
Total loans receivable		$	2,538,641			$	960,943

The loan segments in the above table have unique risk characteristics with respect to credit quality:

• The repayment of commercial loans is generally dependent on the creditworthiness and cash flow of borrowers, and if applicable, guarantors, which may be negatively impacted by adverse economic conditions. While the majority of these loans are secured, collateral type, marketing, coverage, valuation and monitoring is not as uniform as in other portfolio classes and recovery from liquidation of such collateral may be subject to greater variability.

• Payment on commercial mortgages is driven principally by operating results of the managed properties or underlying business and secondarily by the sale or refinance of such properties. Both primary and secondary sources of repayment, and value of the properties in liquidation, may be affected to a greater extent by adverse conditions in the real estate market or the economy in general.

• Properties underlying construction, land and land development loans often do not generate sufficient cash flows to service debt and thus repayment is subject to ability of the borrower and, if applicable, guarantors, to complete development or construction of the property and carry the project, often for extended periods of time. As a result, the performance of these loans is contingent upon future events whose probability at the time of origination is uncertain.

• The ability of borrowers to service debt in the residential and consumer loan portfolios is generally subject to personal income which may be impacted by general economic conditions, such as increased unemployment levels. These loans are predominately collateralized by first and/or second liens on single family properties. If a borrower cannot maintain the loan, the Company’s ability to recover against the collateral in sufficient amount and in a timely manner may be significantly influenced by market, legal and regulatory conditions.

Purchase Credit Impaired Loans

The Company holds purchased loans for which there was, at their acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans is as follows at December 31, 2014 and December 31, 2013.

	2014			2013
	(in thousands)
Commercial		$	7,199		$	—
Commercial real estate			1,816			—
Commercial construction			—			—
Residential real estate			806			—
Consumer			—			—
Total carrying amount		$	9,821		$	—

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses for the year ended December 31, 2014. No allowances for loan losses were reversed during 2014.

The accretable yield, or income expected to be collected, on the purchased loans above is as follows at December 31, 2014.

	2014
	(in thousands)
Balance at July 1, 2014		$	5,013
New loans purchased			—
Accretion of income			(142	)
Reclassifications from non-accretable difference			—
Disposals			(66	)
Balance at December 31, 2014		$	4,805

The following table presents nonaccrual loans by class of loans:

Loans Receivable on Non-Accrual Status

	2014			2013
	(in thousands)
Commercial		$	616		$	753
Commercial real estate			8,197			744
Residential real estate			2,796			1,640
Total loans receivable on non-accrual status		$	11,609		$	3,137

Non-accrual loans and loans past due 90 days still on accrual include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified impaired loans.

At December 31, 2014 and 2013, loan balances of approximately $1.0 billion and $564.7 million were pledged to secure borrowings from the Federal Reserve Bank of New York and Federal Home Loan Bank Advances.

At December 31, 2014 and 2013, the net investment in direct financing lease consists of a minimum lease receivable of $4,267,000 and $4,483,000, respectively, and unearned interest income of $538,000 and $733,000, respectively, for a net investment in direct financing lease of $3,729,000 and $3,750,000, respectively. The net investment in direct financing lease is carried as a component of loans in the Company’s consolidated statements of condition and included in the commercial loan segment.

Minimum future lease receipts of the direct financing lease are as follows:

For years ending December 31,	(Dollars in Thousands)
2015		$	228
2016			265
2017			265
2018			265
2019			265
Thereafter			2,441
Total minimum future lease receipts		$	3,729

The Company continuously monitors the credit quality of its loans receivable. In addition to the internal staff, the Company utilizes the services of a third party loan review firm to rate the credit quality of its loans receivable. Credit quality is monitored by reviewing certain credit quality indicators. Assets classified “Pass” are deemed to possess average to superior credit quality, requiring no more than normal attention. Assets classified as “Special Mention” have generally acceptable credit quality yet possess higher risk characteristics/circumstances than satisfactory assets. Such conditions include strained liquidity, slow pay, stale financial statements, or other conditions that require more stringent attention from the lending staff. These conditions, if not corrected, may weaken the loan quality or inadequately protect the Company’s credit position at some future date. Assets are classified “Substandard” if the asset has a well-defined weakness that requires management’s attention to a greater degree than for loans classified special mention. Such weakness, if left uncorrected, could possibly result in the compromised ability of the loan to perform to contractual requirements. An asset is classified as “Doubtful” if it is inadequately protected by the net worth and/or paying capacity of the obligor or of the collateral, if any, that secures the obligation. Assets classified as doubtful include assets for which there is a “distinct possibility” that a degree of loss will occur if the inadequacies are not corrected. All loans past due 90 days or more and all impaired loans are included in the appropriate category below. The following table presents information about the loan credit quality by loan segment at December 31, 2014 and 2013:

Credit Quality Indicators

	December 31, 2014
	Pass			Special Mention			Substandard			Doubtful			Total
	(in thousands)
Commercial		$	481,638		$	3,686		$	14,203		$	289		$	499,816
Commercial real estate			1,596,606			14,140			23,764			—			1,634,510
Commercial construction			165,880			1,479			—			—			167,359
Residential real estate			230,772			—			4,195			—			234,967
Consumer			2,778			—			101			—			2,879
Total loans		$	2,477,674		$	19,305		$	42,263		$	289		$	2,539,531

	December 31, 2013
	Pass			Special Mention			Substandard			Doubtful			Total
	(in thousands)
Commercial		$	226,013		$	1,719		$	1,284		$	672		$	229,688
Commercial real estate			509,679			14,544			12,316			—			536,539
Commercial construction			41,492			—			1,230			—			42,722
Residential real estate			147,379			978			2,214			—			150,571
Consumer			964			—			120			—			1,084
Total loans		$	925,527		$	17,241		$	17,164		$	672		$	960,604

The following table provides an analysis of the impaired loans by segment at December 31, 2014 and 2013

No Related Allowance Recorded	December 31, 2014
	Recorded Investment			Unpaid Principal Balance			Related Allowance			Average Recorded Investment			Interest Income Recognized
	(Dollars in Thousands)
Commercial		$	481		$	527		$	—		$	494		$	—
Commercial real estate			5,890			6,857			—			6,276			129
Residential real estate			3,072			3,406			—			3,170			41
Consumer			109			101			—			107			—
Total		$	9,552		$	10,622		$	—		$	10,047		$	171

With An Allowance Recorded	Recorded Investment			Unpaid Principal Balance			Related Allowance			Average Recorded Investment			Interest Income Recognized
Commercial		$	387		$	389		$	111		$	389		$	—
Commercial real estate			3,520			3,520			151			3,584			171
Total		$	3,907		$	3,910		$	262		$	3,973		$	171
Total
Commercial		$	868		$	917		$	111		$	883		$	—
Commercial real estate			9,410			10,107			151			9,860			300
Residential real estate			3,072			3,406			—			3,170			41
Consumer			109			101			—			106			—
Total (including related allowance)		$	13,459		$	14,532		$	262		$	14,020		$	342

No Related Allowance Recorded	December 31, 2013
	Recorded Investment			Unpaid Principal Balance			Related Allowance			Average Recorded Investment			Interest Income Recognized
	(Dollars in Thousands)
Commercial		$	449		$	449		$	—		$	494		$	25
Commercial real estate			10,482			10,783			—			10,658			496
Residential real estate			1,858			2,000			—			1,892			94
Consumer			120			120			—			128			6
Total		$	12,909		$	13,352		$	—		$	13,172		$	621

With An Allowance Recorded	Recorded Investment			Unpaid Principal Balance			Related Allowance			Average Recorded Investment			Interest Income Recognized
Commercial		$	672		$	672		$	300		$	687		$	43
Commercial real estate			4,344			4,344			115			4,359			200
Total		$	5,016		$	5,016		$	415		$	5,046		$	243
Total
Commercial		$	1,121		$	1,121		$	300		$	1,181		$	68
Commercial real estate			14,826			15,127			115			15,017			696
Residential real estate			1,858			2,000			—			1,892			94
Consumer			120			120			—			128			6
Total (including related allowance)		$	17,925		$	18,368		$	415		$	18,218		$	864

Loans are considered to have been modified in a troubled debt restructuring when due to a borrower’s financial difficulties, the Company makes certain concessions to the borrower that it would not otherwise consider. Modifications may include interest rate reductions, principal or interest forgiveness, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. Generally, a nonaccrual loan that has been modified in a troubled debt restructuring remains on nonaccrual status for a period of six months to demonstrate that the borrower is able to meet the terms of the modified loan. However, performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of loan modification or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains on nonaccrual status. Included in impaired loans at December 31, 2014 are loans that are deemed troubled debt restructurings. Of these loans, $1.8 million at December 31, 2014 and $5.7 million at December 31, 2013, of which are included in the tables above, are performing under the restructured terms and are accruing interest.

The following table provides an analysis of the aging of the loans by segment, excluding net deferred costs that are past due at December 31, 2014 and December 31, 2013 by class:

Aging Analysis

	December 31, 2014
	30-59 Days Past Due			60-89 Days Past Due			90 Days or Greater Past Due			Total Past Due			Current			Total Loans Receivable			Loans Receivable > 90 Days Past Due and Accruing
	(in thousands)
Commercial		$	6,060		$	—		$	662		$	6,722		$	493,094		$	499,816		$	45
Commercial real estate			4,937			638			5,961			11,535			1,622,975			1,634,510			609
Commercial construction			—			—			—			—			167,359			167,359			—
Residential real estate			1,821			210			3,200			5,231			229,736			234,967			557
Consumer			30			1			—			31			2,848			2,879			—
Total		$	12,848		$	849		$	9,823		$	23,520		$	2,516,011		$	2,539,531		$	1,211

	December 31, 2013
	30-59 Days Past Due			60-89 Days Past Due			90 Days or Greater Past Due			Total Past Due			Current			Total Loans Receivable			Loans Receivable > 90 Days Past Due and Accruing
	(in thousands)
Commercial		$	18		$	—		$	753		$	771		$	228,917		$	229,688		$	—
Commercial Real Estate			221			—			744			965			535,574			536,539			—
Commercial construction			—			—			—			—			42,722			42,722			—
Residential real estate			990			258			1,640			2,888			147,683			150,571			—
Consumer			5			—			—			5			1,079			1,084
Total		$	1,234		$	258		$	3,137		$	4,629		$	955,975		$	960,604		$	—

The following table details the amount of loans that are evaluated individually, and collectively, for impairment (excluding net deferred costs), acquired, and the related portion of the allowance for loan loss that is allocated to each loan portfolio class:

	December 31, 2014
	Commercial			Commercial real estate			Commercial construction			Residential real estate			Consumer			Unallocated			Total
	(in thousands)
Allowance for loan and lease losses:
Individually evaluated for impairment		$	111		$	151		$	—		$	—		$	—		$	—		$	262
Collectively evaluated for impairment			2,972			7,648			1,239			1,113			7			919			13,898
Acquired with deteriorated credit quality			—			—			—			—			—			—			—
Total		$	3,083		$	7,799		$	1,239		$	1,113		$	7		$	919		$	14,160
Gross loans:
Individually evaluated for impairment		$	452		$	6,284		$	—		$	2,180		$	101		$	—		$	9,017
Collectively evaluated for impairment			492,165			1,626,410			167,359			231,981			2,778			—			2,520,693
Acquired with deteriorated credit quality			7,199			1,816			—			806			—			—			9,821
Total		$	499,816		$	1,634,510		$	167,359		$	234,967		$	2,879		$	—		$	2,539,531

The tables above include approximately $1.2 billion of acquired loans for the period ended December 31, 2014 reported as collectively evaluated for impairment.

	December 31, 2013
	Commercial			Commercial real estate			Commercial construction			Residential real estate			Consumer			Unallocated			Total
	(in thousands)
Allowance for loan and lease losses:
Individually evaluated for impairment		$	300		$	115		$	—		$	—		$	—		$	—		$	415
Collectively evaluated for impairment			1,398			5,631			362			990			146			1,391			9,918
Total		$	1,698		$	5,746		$	362		$	990		$	146		$	1,391		$	10,333
Gross loans:
Individually evaluated for impairment		$	1,121		$	14,826		$	—		$	1,858		$	120		$	—		$	17,925
Collectively evaluated for impairment			228,567			521,713			42,722			148,713			964			—			942,679
Total		$	229,688		$	536,539		$	42,722		$	150,571		$	1,084		$	—		$	960,604

The tables above include approximately $34.0 million of acquired loans for the period ended December 31, 2013 reported as collectively evaluated for impairment.

The Company’s allowance for loan losses is analyzed quarterly. Many factors are considered, including growth in the portfolio, delinquencies, nonaccrual loan levels, and other factors inherent in the extension of credit. There have been no material changes to the allowance for loan loss methodology as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

A summary of the activity in the allowance for loan losses is as follows:

	Year Ended December 31, 2014
	(Dollars in thousands)
	Commercial				Commercial real estate				Commercial construction			Residential real estate				Consumer				Unallocated				Total
Balance at January 1, 2014		$	1,698			$	5,746			$	362		$	990			$	146			$	1,391			$	10,333
Loans charged-off			(379	)			(398	)			—			(159	)			—				—				(936	)
Recoveries			50				—				—			19				11				—				80
Provision for loan losses			1,714				2,451				877			263				(150	)			(472	)			4,683
Balance at December 31, 2014		$	3,083			$	7,799			$	1,239		$	1,113			$	7			$	919			$	14,160

	Year Ended December 31, 2013
	(Dollars in thousands)
	Commercial				Commercial real estate				Commercial construction			Residential real estate				Consumer				Unallocated			Total
Balance at January 1, 2013		$	2,424			$	5,323			$	313		$	1,532			$	113			$	532		$	10,237
Loans charged-off			(6	)			(126	)			—			(175	)			(22	)			—			(329	)
Recoveries			41				28				—			—				6				—			75
Provision for loan losses			(761	)			521				49			(367	)			49				859			350
Balance at December 31, 2013		$	1,698			$	5,746			$	362		$	990			$	146			$	1,391		$	10,333

	Year Ended December 31, 2012
	(Dollars in thousands)
	Commercial			Commercial real estate				Commercial construction				Residential real estate				Consumer				Unallocated			Total
Balance at January 1, 2012		$	1,527		$	5,972			$	707			$	1,263			$	51			$	82		$	9,602
Loans charged-off			—			(57	)			—				(454	)			(16	)			—			(527	)
Recoveries			—			80				540				210				7				—			837
Provision for loan losses			892			(783	)			(934	)			509				72				569			325
Balance at December 31, 2012		$	2,419		$	5,212			$	313			$	1,528			$	114			$	651		$	10,237

At December 31, 2014, there were 0 commitments to lend additional funds to borrowers whose loans were nonaccrual or contractually past due in excess of 90 days and still accruing interest, or whose terms have been modified in troubled debt restructurings.

Troubled Debt Restructurings

During the years ending December 31, 2014, 2013 and 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Loans modified in a troubled debt restructuring totaled a recorded investment of $2.8 million at December 31, 2014, of which $1.0 million were on non-accrual status. Loans modified in a troubled debt restructuring totaled $6.6 million at December 31, 2013 of which $0.8 million were on non-accrual status. The remaining loans modified were current and have complied with the terms of their restructure agreement. The Company has allocated 0 specific allocations with respect to loans whose loan terms had been modified in troubled debt restructurings as of December 31, 2014.

The following table presents loans by segment modified as troubled debt restructurings that occurred during the year ended December 31, 2014 (dollars in thousands):

	Number of Loans		Pre-Modification Outstanding Recorded Investment			Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial		1		$	672		$	289
Commercial real estate		—			—			—
Commercial construction		—			—			—
Residential real estate		2			275			272
Total		3		$	947		$	561

The following table presents loans by segment modified as troubled debt restructurings that occurred during the year ended December 31, 2013 (dollars in thousands):

	Number of Loans		Pre-Modification Outstanding Recorded Investment			Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial		—		$	—		$	—
Commercial real estate		—			—			—
Commercial construction		—			—			—
Residential real estate		—			—			—
Total		—		$	—		$	—

The following table presents loans by segment modified as troubled debt restructurings that occurred during the year ended December 31, 2012 (dollars in thousands):

	Number of Loans		Pre-Modification Outstanding Recorded Investment			Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial real estate		1			225			225
Residential real estate		1			714			675
Consumer		1			1,354			137
Total		3		$	2,293		$	1,037

The Company had a $333,000 charge-off in connection with a loan modification at the time of modification during the year ended December 31, 2014. There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ended December 31, 2014. The TDRs presented as of December 31, 2014 did not increase the allowance for loan loss.

There were 0 troubled debt restructurings that occurred during the year ended December 31, 2013. The Company had 0 loans charged-off in connection with a loan modification at the time of the modification during the year ended December 31, 2013. There were 0 troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ended December 31, 2013. The TDRs presented as of December 31, 2013 did not increase the allowance for loan loss.

The Company had 0 loans charged-off in connection with a loan modification at the time of the modification during the year ended December 31, 2012. The Corporation had one loan that defaulted during the twelve months ended December 31, 2012 that had previously been modified as a TDR within the previous twelve months. The TDRs presented as of December 31, 2012 did not increase the allowance for loan loss.